To accurately apply the income approach, entrepreneurs need to consider several key inputs:
Projected Future Earnings: These are estimates of the business's future revenues, operating costs, and net income. Discount Rate: This rate reflects the risk associated with the business and the expected return on investment. Capitalization Rate: This rate is used in the capitalization of earnings method and is based on the required rate of return for investors and the growth rate of earnings. Growth Rate: This is the estimated rate at which the business's earnings are expected to grow over time.