Under the income approach, future cash flow drives value. The Income Approach and the Expenditure Approach to Measuring the GDP of a Nation by Jason Welker GDP is generally understood to represent the health of a nation’s economy, and most people realize that if GDP is growing, things are going well, while if it’s falling things have turned sour in the economy. Cost, Market and Income Approach to Value Component . The net income approach suggested by David Durand brings forth the relevance of capital structure in calculating the value of a firm.The WACC (Weighted Average Cost of Capital) which is the weighted average of debt and equity will decide the value of the firm. How do these two commonly used methods compare and which one is appropriate for a specific investment?

Although that sounds simple, there are several methods that fall under the income approach, including discounted cash flow and capitalization of earnings.

Asset Approach Asset approach looks at a business from a set of assets and liabilities of the company for business valuation.

The others are market approach, or sales comparison approach, and income approach.The fundamental premise of the cost approach is that a potential user of real estate won't, or shouldn't, pay more for a property than it would cost to build an equivalent.

In the income approach, it will be pointed out that the approach is basically applied only to the corporations sector where their business accounting allows for the direct measurement of gross operating surplus and value added. There are three approaches to valuing a business. The income based approach works fine with stable, low risk instruments that are widely traded in the developed markets such U.S. Treasury bonds. The cost approach is one of the three approaches to value, along with the sales comparison and income approach, that an appraiser uses to estimate the value of a property. The contribution approach is a presentation format used for the income statement, where all variable costs are aggregated and deducted from revenue in order to arrive at a contribution margin, after which all fixed costs are deducted from the contribution margin in order to arrive at the net profit or loss.The format of an income statement under the contribution approach is as follows:

Differences between net income (NI) and net operating income (NOI) approach Role of Capital Structure. The others are market approach, or sales comparison approach, and income approach.The fundamental premise of the cost approach is that a potential user of real estate won't, or shouldn't, pay more for a property than it would cost to build an equivalent. This leaves the cost approach and sales comparison approach as being the most commonly used approaches to value. CE Credits: Varies based on course length: Self Study: Not currently available: Web Based: Available from some Professional training organizations. In real estate appraisal, the cost approach is one of three basic valuation methods.

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