Valuation is the technique of estimation or determining the fair price or value of property such as building, a factory, other engineering structures of various types, land etc.

1. SARDAR PATEL COLLEGE OF
ENGINEERING,BAKROL

2. SUB:- PROFESSIONAL PRACTICE AND
VALUATION
(2170610)
GUIDED BY: PROF. CHETAN MACHHI
1 TIRATH PRAJAPATI 151240106066
TOPIC : - VALUATION

3. What isvaluation?
Valuation is the technique of estimation ordetermining
the fair price or value of property such asbuilding, a
factory, other engineering structures of various types,
land etc.
Byvaluation the present value of aproperty isdefined.
Thepresent value of property may be decided by its
selling price, or income or rent itmay fetch.
Thevalue of property depends on its structure,life,
maintenance, location, bank interest, etc.
Cost:-
means original cost of construction of purchase.

4. Purpose ofvaluation : -
Buying or selling property :-
when it is required tobuy or
to sell aproperty, its valuation isrequired.
Taxation: -
To assess the tax of property its
valuation is required. Taxesmay be municipal tax,
wealth tax, property tax, etc., and all taxes are fixed
on the valuation of theproperty.

5. Security of loans or mortgage :-
when the loans are
taken against the security of the property, itsvaluation
is required.
Compulsory acquisition:-
whenever aproperty is
acquired by law compensation is paid to the owner.To
determine the amount of compensation valuation of
property isrequired.
Valuation of aproperty is also required for insurance
etc.

6. Grossincome:-
gross income is the total income and
includes all receipts from various sources the
outgoing and the operational and collection charges
are not deducted.
Net income or net return:-
this is the saving or the
amount left after deducting all outgoings, operational
and collection expenses from the gross income or
totalreceipt.
Sinking fund:-
Acertain amount of gross rent is set
aside annually assinking fund to accumulate the
total cost of construction when the life ofthe
building is over. This annual sinking fund is also taken
asoutgoings.

7. Scrape value:-
scrape value is the value of the
dismantled material. That means after dismantle we
will get the steel, brick, timber etc. in caseof machines
the scrape value is metal or dismantle parts. In general
the scrape value is about 10 % of total cost of
construction.
Scrapevalue =sale of useable material – cost of
dismantling and removal of the rubbish material.

8. Year’spurchase(Y.P):-
Thecapitalize value which
needs to be paid once for all to receive anet annual
income of Re1 by way of interest at the prevailing
rate of interest in perpetuity (i.e for an indefinite
period) or for afixed no. of days.
* Supposethe rate ofinterest is 5%per annum. One
hasto deposit Rs100 to get Rs5 per annum
Now, to get Re1 he hasto deposit 100/5 =Rs20 per
annum
Therefore, YP=100/ rate of interest=1/R

9. • In caseof life of property is anticipated to be short
and to account the accumulation of sinking fund and
interest on income of the property to replace capital,
the year’s Purchaseis suitablyreduced.
- YearsPurchase(Y.P)=1/ (R+Sc)
Example:- Calculate the value of yearspurchase fora
property if its life is 20 yrs and the rate of
interest is 5%.For sinking fund the rate of
interestis 4.5%
Soln:-
Here, R=5%, R1=4.5%
Y.P=1/(R+Sc)
Coeff. Of sinking fund (Sc)=R1/((1+R1)n-1) =0.0319
Y.P=1/(.05+.0319)=12.21

10. Depreciation:-
is the lossin the value of the property
due to is use,life, wear, tear, decayand obsolescence.
Thegeneral annual decrease in the value ofa
property is known asannual depreciation.
Usually,the percentage rate of depreciationis lessat
the beginning and generally increase during later
years.
Methods of calculating depreciation: -
1)Straight line method
2) constant percentage method
3) Sinkingfund method.

11. Straight line method or fixed installment
Under this method, the same amount of
depreciation is charged every year
throughout the life of the asset.
The formula = Total cost of acquisition -
residual value or
scrap value
Estimated life
r =R/C * 100; r =
depreciation rate R = Amount of
depreciation, C = Acquisition cost

12. Advantages of Straight line method:-
Simple, easy to understand and to apply
It provides uniform charge every year
It’s calculated on original cost over the life time
Disadvantages:-
Depreciation is not related to the usag factor
It ignores the fact that in the later years of the life
of the asset, efficiency of the asset declines.
Loss of interest on investment in the asset is
not accounted for

13. THANK
YOU