Appraisal & Valuation Methodology Report Prepared For: Abco Company
Client Appraisal
of Possible Value Range
Business Name:
Abco Company
Report and valuation prepared by: Graham Martin
29 Segura Street,
Palm Beach NSW
Ph:
02 9865 5222
Fax:
02 5664 2655
Email: [email protected]
Copyright. All Rights Reserved. Graham Martin
1
Appraisal & Valuation Methodology Report Prepared For: Abco Company
Multiples of Earnings Assumptions
Multiples of Earnings Valuation
Adjusted Earnings
Forecast Year
836,719
2013/2014
Cap Rate = 45%
Adjusted EBIT
375,000
Industry Range
Multiple Range
Value Range
Low End
High End
1.5
3
562,500
1,125,000
Risk Profile
Attractiveness
Index
(Risk factor
reversed)
Likely Multiple Valuation
Manual Adjustment
Final Multiple
Final Value
49%
2.23
0
EBIT Period
2013/2014
2.23
836,719
Adj EBIT
375,000
Multiple Earnings
Confidence Error Range*
2.23
Business Value
836,719
This is the range set from the final value based on level of
confidence . Ie very confident would mean a 0% range
Confidence Range
30%
Valuation Range
Valuation Range
Low End
711,211
High End
962,227
Industry Range
Low
711,211
High
962,227
Low
562,500
High
1,125,000
Copyright. All Rights Reserved. Graham Martin
2
Appraisal & Valuation Methodology Report Prepared For: Abco Company
Discounted Cash Flow Assumptions
Discounted Cash Flow Valuation
Discounted Cash Flow
DCF Year
1,013,811
10
YEAR 1
Forecast Revenue
Forecast Adj Earnings
1,300,000
375,000
Forecast Adj Cash
262,500
5,025,063
Total Cash All Periods
Industry Range
Low End
High End
23
50
Discount
Factor Range
Risk Profile
Attractivenes
(Risk factor
s Index
reversed)
Likely Discount Factor
Manual Adjustment
49%
36.8%
0%
10 Year
Start Year
DCF Period
Final Discount Factor
Final Value
2013/2014
36.8%
1,013,811
Starting Cash
262,500
Discount Factor
Confidence Error Range*
36.8%
Business Value
1,013,811
This is the range set from the final value based on level of
confidence . Ie very confident would mean a 0% range
Confidence Range
15%
Valuation Range
Valuation Range
Low End
High End
Low
937,775
High
1,089,847
937,775
1,089,847
Copyright. All Rights Reserved. Graham Martin
3
Appraisal & Valuation Methodology Report Prepared For: Abco Company
Potential Appraisal of Possible Value Range
Multiples of Earnings
Discounted Cash Flow
836,719
1,013,811
The final potential appraisal and possible range of values from this simplified analysis
includes components of goodwill plus balance sheet items such as net debtors, creditors
and cash, inventory, capital assets, property and other miscellaneous items.
The key components from the Abco Company balance sheet supplied and estimated by
the client are as follows.
Assets
ADJUSTED VALUES
Net Debtors Creditors
Inventory/Stock
Capital Equipment
Other Assets
Other
Other
0
0
0
0
0
0
Total Balance Sheet Items to add (Adjusted Value)
0
Potential Appraisal & Possible Value based on this simplified analysis
Methodology
Goodwill Value
Plus Assets
Possible Appraisal
Value
Multiples of Earnings
836,719
0
836,719
Discounted cash Flow
1,013,811
0
1,013,811
Copyright. All Rights Reserved. Graham Martin
4
Appraisal & Valuation Methodology Report Prepared For: Abco Company
Valuation Examples
To illustrate the differences of the potential value of your business let us provide you
with some examples based on your financials.
The examples are based on a common valuation methodology based on multiples of
adjusted earnings. This method looks at your current earnings (adjusted) and multiplies
this by a number usually ranging between 1 and 10. The number that your adjusted net
profit is multiplied by is based on an industry standard or perceived level of risk and
investor "return on investment" criteria.
Most small businesses are valued at a multiple of between 1 and 2.
In the case of Abco Company if we placed the earnings that were supplied to us and
multiplied it by this factor then your business would have a possible valuation range
of the following
Copyright. All Rights Reserved. Graham Martin
5