Assessing Value through Reproduction and Replacement Costs
Asset-Based Business Valuations assume a business asset's value is indicated by the cost of reproducing or replacing it, less an allowance for physical deterioration and obsolescence. The approach is commonly used for assets not sold on an active market, such as land improvements and special-purpose equipment. For asset-based business valuations, this approach generally applies to companies with little value beyond the value of their intangible assets, such as holding companies. It is also used when valuing individual components of a business enterprise.