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Calculated
Intangible Value
•Calculate average
pre-tax earnings for three years
Calculate average year-end tangible assets for 3
years
Divide earnings by assets --> company average ROA for 3
years
Find industry average ROA
Multiply industry ROA by company's tangible assets. Subtract
product from
company's pre-tax earnings. --> Excess return.
Calculate 3 year average tax rate. Multiply by excess return
Subtract from excess return --> premium attributable to
intangible assets.
Calculate Net Present Value of Premium. Divide premium by
discount rate. (i.e., cost of capital)