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The sources of confusion, criticism, and, at times, derision, the excess earnings method (EEM), or "hybrid" or "formula" approach is a challenging, yet useful tool for many appraisers. Despite use in the valuation of intangible assets for divorce, small business, and fair value settings, among others, its full range of applications and proper implementation remains clouded. In this webinar, expert appraiser James Alerding leads listeners through the EEM, its history and its implementation to provide a clear understanding of the strengths, weaknesses, and uses of this valuation tool.
Program Agenda
History of the Excess Earnings (Cash Flow) Method
ARM 34
RR 68-609
Arthur Crandall book
Procedures for the Excess Earnings Method (Traditional)
Steps included in applying the method
Should the combined discount or capitalization rate for tangible and intangible assets equal the discount rate for the DCF method?
The Excess Compensation (Modified Approach) to the Excess Earnings Method
Application in divorce cases
How it works
Relationship to personal goodwill
Support for the use of this methodology
Pros and Cons of the Excess Earnings method
Learning Objectives
Learn the background and history of the Excess Earnings (Cash Flow) Method
Learn how to apply the EEM in a valuation
Learn how to test the reasonableness of the EEM
Learn about the Excess Compensation Modified EEM in divorce cases
Learn the pros and cons of the EEM
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