What are the Key Steps in the Income Based Approach?
The income based approach involves several key steps:
Forecasting Future Earnings: Estimate the future revenues, expenses, and net income of the business. Determining the Discount Rate: Calculate the appropriate discount rate to reflect the risk of future earnings. Discounting Future Earnings: Discount the forecasted future earnings to their present value using the discount rate. Calculating the Business Value: Sum the present values of future earnings to determine the overall value of the business.