Plant and Equipment Valuation NSW
Asset Valuation NSW
Asset Valuation NSW
Machinery Valuers Sydney
Plant and Machinery Valuers Sydney
Call (02) 9037 6380
REQUEST A QUOTE
Contact

Our Plant and Equipment Valuation Methodologies

There is an endless number of methodologies a Sydney plant & equipment valuer may use but not all can be applied to property, plant and equipment. When you hire a valuer of any kind, once you have disclosed what is being valued and the purpose of the valuation, the valuer will then determine the best methodology to employ. For plant and equipment, there is a small selection of methods that can be applied. The three most common methods used for plant and equipment valuations are:

  • Sales Comparison Approach
  • Income Capitalisation Approach
  • Depreciated Replacement Cost Approach

Sales Comparison Approach

The sales comparison approach requires the use of comparables. A plant and equipment valuer will use the information that they have of an asset and find comparable items. When it comes to property, the comparable must be located in the same city or suburb and be of the same size. For equipment, a comparable will have the same use, preferably of the same make and model. Once an acceptable number of comparables have been found, generally 3-6, a valuer will use their sales prices to determine the current market value of the item being valued.

While this is a common valuation method for real estate property, it is a very commonly used for all types of valuations. This includes business valuations, asset, equipment, and machinery valuations. This methodology is used in most circumstances and is accepted by various agencies including the Australian Taxation Office (ATO), Revenue NSW, and the Courts.

Income Capitalisation Approach

The income capitalisation method revolves around the income an asset can generate within a year. This method is highly useful for investors and can serve as a good resource when considering a purchase or a sale of an asset. This valuation method can be applied to any asset that could generate income all year long, that is, without being sold or consumed.

The calculation for this method is fairly simple, so long as you have the necessary data to ensure its accuracy. To calculate value using the capitalisation method, a valuer will divide the net operating income (NOI) by the capitalisation rate (Cap Rate). To visualise, the formula used in the income capitalisation method is:

Value = Net Operating Income / Capitalisation Rate

This method is best used when considering a new investment. As the report will include the capitalisation rate you will be able to determine how risky an investment is. Once the value has been calculated an investor will know the fair market value of the asset before making an offer for purchase.

Depreciated Replacement Cost Approach

Depreciated replacement cost (DRC) is a cost-based method of valuation. A valuer collects all relevant information such as an asset’s:

  • Identification: this could be the asset’s make and model, address, registration number and/or name
  • Description: includes the size, location, condition, and use of the asset
  • Original purchase price: applies if purchased through an arm’s length sale
  • Life expectancy of the asset: the average amount of time this asset can be in use
  • Rate of depreciation: a key component of this method that the valuer must calculate

This valuation method determines the cost of replacing the asset. If the asset is property, it will mean the cost of completing reconstructing the property if it has been completely destroyed. For most assets, the replacement cost is the amount a business can expect to pay if they ever need to replace an essential asset. This method is commonly used for insurance purposes but can also be used by accountants or managers for budgeting replacements, upgrades and improvements of property, equipment and machinery.

Why Choose Us?

Our valuers are the experts in Plant and Equipment valuations in NSW. They have the specialised expertise to recognise the correct use of each methodology to achieve the best results for each client.

As all our valuation reports are customised, clients can be confident that the valuer has paid special attention to their wants and needs. The intended purpose of the valuation also impacts the methodology to be used as many agencies have standards and regulations that specify which methods are acceptable.

The valuers employed by Plant and Equipment Valuation NSW have over 20 years of experience as Certified Practising Valuers of Plant & Machinery (P&M). We are industry-leading experts, and our clients are guaranteed high-quality valuations.

For more information on our methodologies or valuation standards, feel free to reach out. Our Friendly and attentive staff will be happy to help. Get in touch by filling out our online contact form or call us on (02) 9037 6380.