Valuation and Appraisal Principles Flashcards

Comprehensive practice flashcards covering Uzbekistani valuation laws, appraisal principles, financial mathematics, and asset-specific valuation methods.

Valuation Activity

The activity of a valuation organization aimed at determining the value of an appraisal object.

Law of the Republic of Uzbekistan "On Valuation Activity"

The primary legislative act regulating appraisal activities and defining concepts like the appraisal object, contract requirements, and report contents.

Valuation Date

The specific calendar date on which the value of the appraisal object is established.

Independent Valuation

An assessment of property value performed by a neutral party.

Market Value

The most probable price at which an object can be sold on the open market in a competitive environment, assuming the parties act reasonably and without compulsion.

Liquidation Value

The estimated amount for which a property is expected to exchange in a forced sale within a shortened marketing period.

Investment Value

The value of a business or property for a specific investor based on their individual plans and expectations.

Principle of Utility

An appraisal principle stating that the more an object is able to satisfy the needs of the owner, the higher its value.

Principle of Contribution

The concept that the value of an object is determined by the contribution of each factor or element to the overall utility and value.

Principle of Substitution

The basic principle of the cost approach, assuming that a prudent buyer would not pay more for an object than the cost of acquiring an equivalent substitute.

Principle of Best and Most Efficient Use (BMEU)

The use of a property that is physically possible, legally permissible, and financially feasible, resulting in the highest value.

Direct Capitalization Method

A method that converts a single year's typical income directly into value by dividing it by a capitalization rate.

Discounted Cash Flow (DCF) Method

A valuation method used for objects with unstable income and expense dynamics, involving the discounting of future cash flows to their present value.

WACC (Weighted Average Cost of Capital)

A formula used to determine the discount rate for cash flows to invested capital, calculated as: $WACC = k_d \times (1 - t_c) \times w_d + k_p \times w_p + k_s \times w_s$.

Beta Coefficient ($\beta$)

In the CAPM, a measure of investment risk caused by the influence of macro- and microeconomic factors.

Gordon Model

A method to determine the value of an object at the end of a forecast period by capitalizing the first post-forecast year's cash flow, used when income stabilization is expected.

Physical Obsolescence

The loss of value due to deterioration of the original technical and economic properties under the influence of natural processes or use.

Functional Obsolescence

A decrease in the utility of an object caused by the development of new technologies, materials, or designs in analogous objects.

External (Economic) Obsolescence

The loss of value caused by factors external to the object, such as changes in market demand or the environment.

Net Operating Income (NOI)

The income remaining after deducting all operating expenses from the effective gross income, but before debt service and taxes.

Lump-sum Payment (Pauschal)

A firmly fixed amount of remuneration for rights provided under a license agreement to use intellectual property, independent of production volume.

Royalty

Periodic payments made throughout the duration of a license agreement, typically calculated as a percentage of the licensee's profit or revenue.

Trademarks

Designations capable of distinguishing the goods and services of one legal or natural person from those of others.

Rule "65-35"

A specific rule used by appraisers for valuing land plots of irregular (e.g., triangular) shapes.

Internal Rate of Return (IRR)

The interest rate ($NPV = 0$) that equates the present value of expected cash inflows with the present value of cash outflows.

Current Value of Annuity

A financial function used to determine the present value of a series of equal payments made at regular intervals.

Sinking Fund Factor

The function that determines the periodic payment required to be deposited at a given interest rate to reach a specific future sum.

Rule of 72

A simplified method used to determine the period over which an initial deposit doubles at a given interest rate.