What does Market Price Mean and the Calculation Method?
2023-06-05
Summary:
Master the market price method for asset valuation by using market comparisons to determine value. Learn calculation methods for accurate assessment.
The market price is a key determinant in asset valuation. The current market price method, also known as the market comparison method, determines the value of an asset based on the prices of similar or comparable reference materials in the open market. This method is considered the simplest and most effective because the information in the evaluation process directly comes from the market, accurately reflecting the behavior of the asset. However, the application of this method depends on the establishment and development of a market economy and the degree of marketization of assets. In China, the establishment and improvement of the market economy have provided effective space for applying the current market price method, making it an increasingly important asset valuation method.
The calculation method of the current market price method
① Direct comparison method. The value of the asset is estimated based on the market price of the same asset in a new situation, minus the accumulated depreciation of the useful life calculated at the current market price. Its usage condition is that reference objects that are almost identical to the evaluation object can be found in the equipment trading market. This method is simple, most objective to the market, and can most accurately reflect the market value of equipment.
② Similarity comparison method. It is based on the analysis of the market sales price of similar reference objects, that is, according to the market price of market reference objects, by comparing their differences in utility, capacity, quality, degree of newness and obsolescence, and making adjustments according to certain methods, the value of the appraisal object is determined. The similarity comparison method can be evaluated by comparing the overall reference object, or by categorizing and comparing the items separately. The key here is to choose a reference object, which may be one or several. The calculation formula is:
Appraisal value=[market price of new reference material - (market price of new reference material/estimated service life) × The useful life of the asset] × Adjustment coefficient
The selection of adjustment coefficients should be discussed in conjunction with actual situations. For example, when applying the above calculation formula for evaluation, it is verified that the evaluated equipment, compared with the brand new reference material (equipment), consumes 1.2 times the annual power, fuel, and labor costs of the reference material when the output is the same. Therefore, the adjustment coefficient is taken as 0.6-0.8.
For example, a certain factory plans to invest a rotary compressor in a joint venture. This device has been in use for 5 years, and there is no similar transaction price for spinning machines in the market. However, there is a similar transaction price for spinning machines, with the current market price of 70000 yuan per unit. The expected residual value is zero and the expected service life is 15 years. Based on factors such as comprehensive commodity price comparison, raw material and labor costs, an adjustment coefficient of 1.3 is determined. Calculate the evaluation value of the spinning machine.
Evaluation value=[70000- (70000/15) × 5] × 1.3=60667 yuan
【 EBC Platform Risk Reminder and Disclaimer 】: There are risks in the market, and investment needs to be cautious. This article does not constitute investment advice.
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