Application Logic The primary steps for determining the subject’s value under the Asset Based Approach, which incorporates the use of the excess earnings method, follows • Mark the subject assets and liabilities to the appropriate standard of value arriving at the net tangible assets of the subject (i.e., adjusted book value. • Determine an appropriate rate of return on the net tangible assets. • Select an appropriate economic income flow from the subject. • Calculate the excess earnings of the subject. • Determine an appropriate capitalization rate for the excess earnings and calculate the unrecorded value of intangibles. • Combine the net tangible assets, intangible asset value, and any net non‐ operating assets to determine the subject value. The following paragraphs describe the steps in more detail.
