Professional Documents
Culture Documents
Information Needed:
When to use?:
This method is not really a good approach to valuate IPR
of technology.
It may be used to assess the cost of developing a new
technology similar to the technology whose cost is
computed.
Technology is narrow in scope and thus easy to replicate
or "design around.
Market
Approach
Philosophical basis : The intrinsic value is close to
impossible to estimate.
The value of an asset is whatever the market is willing
to pay for it based upon its characteristics.
Market
Approach
Rating/Ranking Method:
Information Needed:
Year-by-year cash flow projection, or an estimated potential
payoff
A discount rate to apply to these cash flows
The life of the asset
Income
Approach Net present value
Income Discount cash flow
Approach
analysis
Disadvantages:
The inputs and information are noisy and
difficult to estimate; they can be manipulated
to provide the conclusion one wants
If future cash flow streams cannot be
accurately predictable .
Not all risks are accounted for by the discount
rate.
Income
Approach
We must deduct the current costs before a decision is made to choose the project.
Market Income
Approach Approach
Combination of methods
(EBITDA multiplier method)
The average price-earning ratio is computed using
market data of similar technology.
The value of the technology to be assessed is
obtained by multiplying the expected earning with
the average price-earning ratio.
Use the EBITDA multiplier method to assess the value
of Company Q.
You may assume that for Company Q, the gross
margin is 25% of revenue and that the total amount of
various overhead to be deducted from the profit is $15
million.
Relevant data for companies in similar business are
given in the table below.