branding

1. Brand Valuation

2. BRAND VALUATION METHODS
These can be broadly classified into:
 Cost based
 Income based
 Market based

3. COST BASED METHODS
 Book value
 Replacement value
 Liquidation value

4. 1.Book value method
Current cost valuation
 All assets are taken at current value and
summed to arrive at value
 This includes tangible assets, intangible assets,
investments, stock, receivables
VALUE = ASSETS - LIABILITIES

5. 2. Replacement value method
 Cost of replacing existing business is taken as the
value of the business

6. 3. Liquidation value method
 Value if company is not a going concern
 Based on net assets or piecemeal value of net
assets

7. INCOME BASED METHODS
 Earnings capitalization method.
 Discounted cash flow method (DCF)

8. 1.Earnings capitalisation method
 This method is also known as the Profit earnings
capacity value (PECV)
 Company’s value is determined by capitalizing its
earnings at a rate considered suitable

9. 2.Applicability of DCF method
 Cash flow to equity
 Discount rate reflects cost of equity
 Cash flow to firm
 Discount rate reflects weighted average cost of
capital

10. Limitations
 Companies in difficulty
 Negative earnings
 May expect to lose money for some time in future
 Possibility of bankruptcy

11. MARKET BASED METHOD
 Also known as relative method
 Assumption is that other firms in industry are
comparable to firm being valued
 Standard parameters used like earnings, profit,
book value
 Adjustments made for variances from standard
firms, these can be negative or positive

12. Applicability
 Simple and easy to use
 Useful when data of comparable firms and assets
are available

13. Limitations
 Easy to misuse
 Selection of comparable can be subjective
 Errors in comparable firms get factored into
valuation model