The Excess Earnings Capitalization Rate This article presents a method for calculating the capitalization rate for excess earnings. The good news is that this capitalization rate can be calculated. The bad news is that with the calculated excess earnings capitalization rate, the excess earnings method gives the same value as the single period capitalization method under the Income Approach, i.e., the excess earnings method is not an independent valuation method. This article presents a method for calculating the capitalization rate for excess earnings. The good news is that this capitalization rate can be calculated. The bad news is that with…
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Considerations for Fair Market Value Healthcare enterprises are increasingly relying on intangible assets to enhance their ability to provide timely, quality professional medical services to patients. Trade secrets are one such class of intangible asset that may be owned by a healthcare enterprise. A trade secret is any information that has economic value and is not generally known by the public. Technical and specialty research may be considered the “work-in-progress” of patents, copyrights, trademarks, or other intangible assets, and this research usually entails the use of trade secrets, i.e., special “know how” that is often protected (or padlocked), in contrast…
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In Appraising Outpatient Enterprises Healthcare related outpatient enterprises are those that provide services that do not require hospital admission and may be performed outside the premises of a hospital. Valuation of healthcare related outpatient enterprises, similar to the valuation of any business, should include consideration of the three general approaches to valuation, i.e., the income approach, the market approach, and the asset/cost approach. Use of specific methods under each approach will be guided by the facts and circumstances of the engagement, e.g., availability of data, nature of the current transactional marketplace, etc. This article focuses on utilizing an asset/cost based…
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The Method You Choose Depends On the Data You Have Application of discounts and premiums is one area where valuators demonstrate added value. Paul R. Hyde shows how and when to choose the most appropriate analytical method.