Valuation Definitions

Forced liquidation value

Forced liquidation value is the value realized when assets are sold piecemeal, under duress at public auction. Forced liquidation value assumes that the buyer is responsible for all costs of removal and is purchasing the assets "as is, where is" with no warrantees or representations as to the condition of the assets being made by the seller. It is further assumed that the assets are properly advertised in a manner considered to be commercially reasonable.

Orderly liquidation value

Orderly liquidation is the value realized when assets are sold piecemeal, through negotiation, over a predetermined period of time (often three to six months). Orderly liquidation value assumes that the buyer is responsible for all removal costs and is purchasing the assets "as is, where is'" with no warrantees or representations as to the condition of the assets being made by the seller. It is further assumed that the assets are properly advertised in a manner considered to be commercially reasonable. Buyer and seller further acknowledge that if an acceptable price cannot be negotiated within the time period specified the final option would be to offer the assets for sale at public auction.

Market value

Market value is defined as the price, expressed in terms of cash or cash equivalents, at which asset(s) will change hands between a willing and able buyer and seller. It is assumed that both the buyer and seller are acting at arm's length in an open and unrestricted market. Furthermore, neither buyer nor seller is under compulsion to buy or sell and both have reasonable knowledge of the relevant facts.

Orderly liquidation value in place

Orderly liquidation value in place is the price that a knowledgeable buyer would have to pay a knowledgeable seller who is under duress, for asset(s) being purchased in place to remain in operation in "as is" condition, taking advantage of all leasehold and site improvements designed to facilitate its/their operation. An evaluation of this type does not take into consideration the past, present or forecasted income-generating performance of the company or the income-generating performance of any of the products produced by the company, nor does the evaluation consider whether the business generates sufficient income to support the values concluded. It is, however, assumed that all specially designed and built asset(s) will continue to be used in the manner for which it/they was/were originally intended.

The orderly liquidation value in place definition assumes an adequate period of time to properly advertise the asset(s) in a manner that is commercially reasonable. However, it is clearly understood by both the buyer and seller that the sale of the asset(s) is under duress, and that the marketing time is limited to a predetermined period of time (often between six and 12 months).

Market value in place

Market value in place is the price at which asset(s) would change hands between a willing and able buyer and seller, with neither under compulsion to buy or sell, with both having full knowledge of the relevant facts. The asset(s) is/are being purchased to remain in place to remain in operation, taking advantage of all leasehold and site improvements designed to facilitate its/their operation, with the seller accurately and completely representing the existing condition and operability of the asset(s) to the buyer.

A market value in place appraisal does not take into consideration the past, present or forecasted income-generating performance of the company or the past, present or forecasted income-generating performance of any of the products produced by the company. Furthermore, an evaluation of this type does not consider whether the business generates sufficient income to support the values concluded. However, it is assumed that all specially designed and built asset(s) will continue to be used in the manner for which it/they was/were originally intended.

Insurable value

Insurable value is the portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy.

Replacement cost

Replacement cost is the current cost of a similar new asset(s) having the nearest equivalent utility to the asset(s) being valued. Furthermore, replacement cost analysis takes into consideration the transportation and installation costs required to facilitate normal operation.

Reproduction cost

Reproduction cost is the current cost of an identical new asset or assets. Reproduction cost analysis assumes the same materials, construction standards, design, layout, utility and quality of workmanship to derive at an estimated cost to construct an exact replica of the machine being appraised.

Actual Cash Value

Actual Cash Value described what it will cost to replace an item at the time of loss after subtracting depreciation. It is a common method of determining the amount of reimbursement for a loss.