Income approaches to Business Valuation

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Income-Based Approaches to Business Valuation

A general way of determining a value indication of a business, business ownership interest, security, or intangible asset using one or more methods that convert anticipated economic benefits into a present single amount.

Capitalization of Benefits Method

A method within the income approach whereby expected future benefits (for example, earnings or cash flow) for a representative single period are converted to value

through division by a capitalization rate.

Discounted Cash Flow Method

A method within the income approach whereby the present value of future expected net cash flows is calculated using a discount rate.

Discounted Future Earnings Method

A method within the income approach whereby the present value of future expected economic benefits is calculated using a discount rate.

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