NRV
Net realizable value (NRV) is the value of an asset that can be realized upon the sale of the asset, less a reasonable estimate of the costs associated with the eventual sale or disposal of the asset. NRV is a common method used to evaluate an asset's value for inventory accounting. NRV is a valuation method used in both Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).
RC
Replacement cost is a term referring to the amount of money a business must currently spend to replace an essential asset like a real estate property, an investment security, a lien, or another item, with one of the same or higher value. Sometimes referred to as a “replacement value”, a replacement cost may fluctuate, depending on factors such as the market value of the asset, and the expenses involved in preparing assets for use. Insurance companies routinely use replacement costs to determine the value of an insured item. Replacement costs are likewise ritually used by accountants, who rely on depreciation to expense the cost of an asset over its useful life. The practice of calculating a replacement cost is known as “replacement valuation”.
Replacing an asset can be an expensive decision, and companies analyze the net present value (NPV) of the future cash inflows and outflows to make purchasing decisions. Once an asset is purchased, the company determines a useful life for the asset and depreciates the asset's cost over the useful life.
PV
Present value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows. Determining the appropriate discount rate is the key to properly valuing future cash flows, whether they be earnings or obligations.
Write briefly on the following bases of valuation: The current purchase price (replacement cost) of the...
Required: Answer the following questions regarding inventory valuation at the year-end using both US GAAP and IFR On December 31, 2017, Jets International had an inventory of five different types of airplane parts that were accounted for on the LIFO inventory method. Given the current fuel costs, airplane parts are not as valuable as they once were. The chart below provides the cost basis, net realizable value, replacement cost and net realizable value ess normal profit as of December 31,...
Which of the following valuation methods reflects current values? A. acquisition cost B. present value of cash flows using historical interest rates C. net realizable value D. adjusted acquisition cost
APV Valuation of LBO In this levered buyout, the debt level of the company changes over time. The debt level will be changing for first five years and then a terminal debt-to-equity ratio will be maintained in future therefore the APV method is appropriate for evaluating the LBO. The steps we must undertake are: Step 1: Calculating the present value of unlevered cash flows for the first five years. Step 2: Calculating the present value of the unlevered cash flows...
1) Metal Works, Inc. is contemplating the purchase of a new milling machine. The purchase price of the new machine is $60000 and its annual operating cost is $2675.67. The machine has a life of seven years, and it is expected to generate $15000 in revenues in each year of its life. Use annual compounding. 4) The lower the interest (discount) rates are a) the less value individuals place on future dollars. b) the more value individuals place on future...
1) Metal Works, Inc. is contemplating the purchase of a new milling machine. The purchase price of the new machine is $60000 and its annual operating cost is $2675.67. The machine has a life of seven years, and it is expected to generate $15000 in revenues in each year of its life. Use annual compounding. 4) The lower the interest (discount) rates are a) the less value individuals place on future dollars. b) the more value individuals place on future...
4. Corporate valuation model The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you've done in previous problems, but it focuses on a firm's free cash flows (FCFS) instead of its dividends. Some firms don't pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model. Charles Underwood Agency Inc....
Estimating Goodwill and Valuation LO 7 Alpha Company is considering the purchase of Beta Company. Alpha has collected the following data about Beta: Beta Estimated Company Market Book Values Values Total identifiable $585,000 $750,000 assets Total liabilities _320,000 320,000 Owners' equity $265,000 Cumulative total net cash earnings for the past five years of $850,000 includes extraordinary cash gains of $67,000 and nonrecurring cash losses of $48,000. Alpha Company expects a return on its investment of 15%. Assume that Alpha prefers...
HW 08 - Stocks and Their Valuation The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value-added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you've done in previous problems, but it focuses on a firm's free cash flows (FCFS) instead of its dividends. Some firms don't pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model....
At year end, the XYZ Company had the following information available: Item Cost Replacement Cost Sales Price Net Realizable Value (NRV) Normal Profit A 70,000 62,500 64,000 56,000 5,100 B 86,000 79,400 94,000 84,800 7,400 C 112,000 124,000 186,400 168,300 18,500 D 140,000 126,000 154,800 140,000 15,400 Total 408,000 391,900 499,200 449,100 46,400 The...
10. Corporate valuation model The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you've done in previous problems, but it focuses on a firm's free cash flows (FCFS) instead of its dividends. Some firms don't pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model. Blur Corp....