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How do you evaluate intangible assets?

xiaolang

Joined
10/3/11
Messages
2
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11
I am doing a project on information assurance. I am confused when I was asked to assign values to assets such as good will, database containing customer information, contracts and procure documents, personnel information and etc. The annual reports of companies are not so helpful. I want to know how you evaluate the prices of these intangible assets in practice. Thank you.
 
Hi xiaoloang,
Value of intangibles = Market Value of Firm - Book Value of Firm
1. Market Value of the firm
2. Book Value of the firm
The Book Value = Book Value of Equity + Book Value of Debt
The Market Value = Market Value of Equity + Market Value of Debt
For Debt, the convention is to use its book value as the best estimate of its current market value. (i.e. treat book value of debt as market)
For Market Value of Equity, there are several ways to do it, (you know at least #3, and hopefully #1 and 2):
1. Discounted Cash Flow
2. Comparables (Financial Multiples)
3. Yahoo Finance (not recommended)
Allocate Value of intangibles to different accounts
There is no formal way of doing this, usually within industry or company, there is an informal standard to decide on how much to allocate to goodwills associated with say brand name vs. human capital.
A tech start up may assign heavier weigthts to human capital (ex. patents, field expertise) versus that of their brand name although it is debatable.
 
Thank you. It is very helpful. Since there is not formal way, I hope it is possible for me to find an example on the values of the different intangible assets.:)
 
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