Market Value
Essay by moneymakingmo • February 7, 2012 • Essay • 758 Words (4 Pages) • 1,566 Views
Market value. This is an estimate of the market price, and can serve as a surrogate for
the market price if there had been an equivalent transaction in a market. In an
efficient market, the expected value of a market price is the market value and is
uniquely defined as of a specific point in time. If a market is inefficient, it is the price
for a set of cash flows that would have been arrived at if an efficient market had
existed.
Present value. This represents an estimate of the underlying value of a set of future
cash flows. It is the value of future cash flows taken from a particular point of view at
a particular point in time. Some believe that present values serve as a useful surrogate
for fair values (while others believe that market values are samples from a population
of possible present values).
Expected value of future cash flows. The components of certain sets of cash flows
(or their monetary equivalents) may be analyzed separately in terms of their actuarial
risk variables: incidence (or frequency), severity (or average size), and timing.
Depending on the types of cash flows involved, it may be desirable to estimate future
cash flows based on these separately or in combination. In developing estimates, it is
necessary to analyze a range of possible values, along with corresponding
probabilities of occurrences likely in the future. These probabilities can either be
developed on an objective or subjective basis, the latter typically used if the necessary
information or experience is unavailable to develop objective estimates or to
supplement experience.
An expected or mean value for the future cash flows would then be
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Fair Market Value (FMV) is a valuation using assumptions that include:
* A willing buyer and a willing seller, with both parties having the facts about the asset. Fair market value is also regarded as the price an "interested but not desperate" buyer and an "interested but not desperate" seller agree upon.
* An open market; that is, one which is accessible by many buyers and sellers, and which is not closed or private.
Fair
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