What are the different Valuation Approaches and provide an explanation for

each approach.

Market Approach:

This approach determines the value of an asset based on the prices of

similar assets in the market. It involves comparing the asset being
valued to comparable assets that have recently been sold, using
metrics such as price-to-earnings ratio or price-to-sales ratio. The
market approach assumes that the market is efficient and that the
value of an asset can be derived from market transactions.

Income Approach:

The income approach determines the value of an asset by calculating

its present value based on the future income it is expected to
generate. This approach is commonly used for businesses or
investments that generate cash flows, and it involves estimating future
cash flows, applying a discount rate to account for the time value of
money and risk, and calculating the net present value.

Asset-Based Approach:

The asset-based approach determines the value of an asset by

considering its net asset value, which is calculated by subtracting
liabilities from assets. This approach is commonly used for valuing
companies or businesses and involves assessing the fair market value of
assets and deducting liabilities to determine the net worth of the
entity.