27.1.09

Guidelines business valuer with income approach

The income approach estimates value the ability to anticipate and calculated inclusion in the company or companies in the return to the owner will receive in the future and sum become indication or the value of the company's inclusion. Capital cost is a function of spending decisions concerning the cost of debt, equity and cost leverage. Methods of assessment based on the income approach can only be applied in two (2) ways: discounted cash flow method, and capitalization of income method.

Income or economic benefits anticipated will be generated by the assessment of future object, which is used in the income approach, must be based business plan through the valuation prepared by management of the votes.

In case the business plan can not be obtained from the Business Management, The Valuer then can arrange a business plan approved by the management and assessors responsible for the mandatory Business plan that state.

Business evaluator must first obtain adequate confidence that the assumptions used in the preparation of business plan based valuation is relevant, and can be grounded.
Economic benefits or income that must be used as the numerator in applying methods of assessment that is based on the income approach is a form of Net Cash Flow (akb) to companies (or net free cash flow for the firm) or akb to equity (net or free cash flow for the equity).

Capitals cost that is used by both methods, as determined in accordance with this obligation as follows: The cost of debt both short and long-term data is determined by using the interest rate from formal financial institutions. In case the company has a stock preferred the cost of equity shares for the preferred dividend paid by the company when the market reflects the level of dividend. If the dividend is paid in different markets with the market value of the company sought to open commensurate pay dividends. The cost for the equity shares shall be counted through the model: capital asset pricing model (CAPM); and Discounted Cash Flow (DCF) model.
Business evaluator must disclose the results of each method as mentioned in the letter's number 20 in the Rating Business Reports.
In case the cost of equity shares to be counted through the CAPM model, must consider the following: Level risk-free rate using a risk-free interest rate of the medium-term investment instruments issued by the government and the Beta is derived from the data published the average industrial sector with the same assessment of the object or the average number of companies in keeping with the benchmark.
In the case of using the discount method, the procedure must be done, among other things: study or adjustments on the assumptions used in preparing the projected financial report; study accurate or adjustments to the calculation of the projected financial statements, and study or adjustments to the accounting policies used in preparing the projections financial reports.
Method discount rate used for: Companies that operate and generate positive operating cash flow; manufacturing companies, trading companies and distributors of goods and services.
Akb projection can be set in two (2) the projection period, namely: the period of time has been set or specific (fixed or specific time period); period of time can still refer to: the age of the main technical factors of production and business planning period of time that has not been considered stable. Determining the period of time eternal (perpetuity period) started one year after the fixed period until the next.
In the case of applying the method to use discount model equity (equity model), must consider the following: cash flow that is required discounted cash flow available to equity holders owner; discount rate and compulsory return level or charge for equity.
In the case of applying the method using a discount capital model (Invested capital model), must consider the following: cash flow discounted the mandatory cash flow is available to all of the capital; discount rate must reflect the weighted average cost of capital that is used to generate the cash flow and value of equity can be estimated by reducing the value of the company or the value of capital that is planted with a market value of natural capital senior (preferred shares in the company's shares have preferred and long term interest bearing debt).
Business marker when using the income approach must disclose in reports Rating Business, among others: the reason or basis why do midyear projections that have been adjusted, when it was selected as the primary assessment, the procedure was done with respect to the application of the methods of assessment based approach income; things about the assignment and the basic framework of the assessment (valuation of the premises); assessment process is clearly and systematically; analysis and understanding Business Valuer information on historical and prospective assessment of objects and things that affect the value of the business object assessment and assumptions the support, conditions that limit the conclusions and opinions and Business Valuer.

Discount rate
Diskonto level is used to convert income economy that will be received in the future that reflect the current value of money and time of uncertainty over the economic realization income. Set in the discount rate used, Business Valuer must consider: the cost of equity, with the notice that: the level of lopsided results expected investors as compensation related to the placement of funds in an investment risk, and inflation estimates. lopsided result of the investment comparable (comparable investments); cost of debt is classified as part of the capital structure, and the risk of specific company and industry conditions.

In estimating the discount rate will be used, the procedure must be done as follows: identify the source of financing is used, set the elements of debt that can be classified as an element of capital structure that meets the conditions are: debt to shareholders that are not flowering is to be paid in that time has been set, and the short-bearing debt into the capital in a permanent job.

Calculate the percentage capital structure or the level of leverage the company, with the stipulation: in case the object is an assessment of minority ownership, the Business Valuer can use the capital structure based on the book value, in terms of assessment of the object is a majority ownership, the compulsory use Business Valuer capital structure based on the company's market value comparable companies in the industry and the same sub-sector, and in estimating the value of investments can use the planned capital structure (the target capital structure) and the capital structure of the plan for targeted mandatory disclosed.

To determine the cost of debt, both short-term (debt capital) or long-term (debt investment), are obliged to use data from the market interest rate of the average bank financing to carry out the business world.
Compulsory make adjustments when there is a debt financing with interest rates that vary with the market interest rate to reflect a comparable risk to the companies or items that are assessed.

Cost of equity shares is preferred dividend paid preferred. Cost of equity shares, is calculated by the method: 1. The capital asset pricing model (CAPM), or (2) DCF model.

In the case of using the CAPM method, must consider these factors as follows: the highest risk-free (risk free rate), which is based on the risk-free interest rate of investment instruments that have a maturity period of less than the 10 (ten) years, issued government; beta, which reflects the systematic risk, which is based on data published by the beta of the average industrial sector with the same assessment of the object or an average of some benchmark companies; equity risk premium, which is based on the published data, and risk attached to the specific object assessment.
Business evaluator can also use the cost of equity derived from the formula of DCF benchmark companies that have market value of equity.

To determine weighted average cost of capital will be used as the discount rate, calculate the required Business Valuer proportionally based on the weight of each type of capital structure that is used and the cost of each type of capital structure.
Rating reports Business obliged to reveal the reason, the assumptions and calculations used discount rate.

Projected revenue for the economic rate by using the income approach
Projection assessment process is the revenue stream for estimation economic assessment of the object by using a discount rate in accordance with the income level economic assessment of the object.

projection must be used in the income approach. In making projections, Business Valuer must: analyze financial statements under the item assessment 3 (three) years and the company's benchmark in the same industry, and make adjustments on the financial assessment of the object.

Adjustments referred to number 22 in the letter c 2 grains) is used as a working paper Business Valuer. Financial information disclosed results of the adjustment required in the reports Business Valuer.

To achieve the adjustment must be done as follows: Analyzing and re-presents the financial data of the object and consistent assessment of the functional currency of a kind; adjust the value that is reported to be a reasonable value; adjust the income and expenses to reflect a reasonable level results sustainable; Separating and adjust all the assets, liabilities, income and non-operating expenses, and in the majority of the assessment must be adjustments to income, the costs that are not common.
Adjustment on the Financial projections include Balance; Reports Profit Loss and Cash Flow Reports.

After the adjustment, he should return projections are presented on economic income, include: Dividend prediction based on dividend pay out ratio; Cash flow and EBITDA.

Discount rate used in the Business Valuer Projection compulsory income adjusted to the size of the object economic assessment.
Growth assessment in accordance with the object level of income generated by the economic capital that is considered mandatory projected.
Projection period is less than 5 (five) years, or tailored to the age of the main production facility.

Projected capital structure must be done consistently.
Discount rate and the appropriate level of capitalization required is defined.
Using your assumptions that the standards or deviate from the premise assessment contract (letter of agreement) assessment of the assignment.
Forbidden to build estimated only with the historical trend.
Reports in the Business Rating mandatory disclosed: the projected revenue stream definition economically, and the discount rate in accordance with the definition must be used in the analysis.

Projected revenue stream consistent with the economic interests of compulsory business object assessment.
Business must assessors are responsible for the projection that has been adjust .

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