Abstract: Appraisals typically are conducted using four standard methods approved by the American Society of Appraisers. For large-scale, technically unique projects, such as chemical and power plants, and old industrial practices, these standard methods are insufficient. These types of projects contain political, technical, and economic risks that are not accounted for in standard valuation methods. To include these risks in an appraisal, a Monte Carlo simulation method can be used. Probability distributions are used to model the appropriate uncertainty. Modeling future decisions that may have to be made concerning the project can also be included to add insight to the risk involved.
Introduction: Appraisals are conducted to find the fair market value of a given property for a wide variety of purposes, including insurance coverage, taxation, and sale. Appraisals to determine value are typically conducted using four approaches: net book value, comparable sales, reproduction or replacement cost, and income capitalization.Net book value is defined as the original cost of the asset, adding capital additions and subtracting capital retirements, and then deducting allowable depreciation. This appraisal method is generally used by accountants to calculate the gain or loss when an asset is sold. Comparable sales can provide an indication of fair market value when asset markets are competitive and liquid and when there have been many similar assets sold in a non-distress situation by a willing seller to a willing and knowledgeable buyer..
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