Article on Valuation of assets

Question

Write an article on Valuation of assets serves for both buyers and sellers of goods and services.

Answer 1

Valuation of assets serves to be an increasingly important concept for both buyers and sellers of goods and services. Many aspects needed to be accounted were intangible and previously it was impossible to reflect these aspects in monetary terms. Multi-criteria Valuation Assets Method (MAVAM) was employed and custom-designed by Aznar et al (2009) according to the requirements of environments with scarce information. This approach combined two extended multi-criteria decision making techniques, AHP, which measured the intangible aspects of asset valuation and GP, which incorporated scarce information.

Three valuation methods namely economic such as direct, indirect, contingent and group, non-economic such as environmental impact assessment methods and multi-criteria methods, and mixed methods (M1, M2 and M3) had been seen from the past. MAVAM method of valuation belongs to the Non-Economic-Economic methods. The combined model was used in valuing an agricultural plot in Valencia (Spain). Eight comparable assets of recent transactions were evaluated based on intangible variables namely vegetation status, soil quality, crop, surface, tree age, irrigation, soil quality, urban expectations and finally value.

Pair wise comparisons were made between these variables of different assets, Saaty’s eigenvector method was employed as the prioritization method, Consistency ratio as inconsistency index and priorities and consistency were obtained finally. GP was applied after prioritization of assets. MAVAM model helps in working with both tangible as well as intangible aspects to value an asset. A similar approach was followed for another valuation which is of great economic and social importance.

Though there were several comparative and analytic valuation methodologies previously, they do not make use of qualitative variables completely and depend on quantitative variables. The inclusion of qualitative variables had been achieved only with the help of such extended multi-criteria decision making models. MAVAM models helped in valuing the assets with less available information. Aznar et al (2009) had successfully valued a few assets accurately with the proposed MAVAM methodology and they had proposed suitability index for evaluating the goodness of fit of the model in addition.