Real Estate Division

CPD 101 - Business Enterprise Valuation

Pre-requisite: This course requires knowledge of income appraisal, including both capitalization rates and discounted cash flow techniques. Prior completion of an applicable income appraisal course is recommended (e.g., BUSI 331 or CPD 131 and CPD 152).

This course explores business valuation as a related appraisal discipline. The course outlines common reasons that business valuations are required and introduces the principles and techniques applied in valuing a business. The lessons emphasize both asset-based and cash flow- based valuations, reflecting the similarities and differences for liquidation scenarios and going concern businesses. The application of these theories and principles will be illustrated in a series of case studies, both in the lesson and on the course website.

The course is applicable to anyone with an interest in learning more about how businesses are valued. It is particularly relevant for real estate professionals, such as appraisers or brokers, who may come across business value issues in their real estate practice, and need a better understanding of how to account for these issues.

Please note that the course is intended only as a brief introduction to this vast area of practice. Students who wish to know more about this subject, or perhaps are considering specializing in this field, are encouraged to pursue further resources beyond the course – the course website provides many links to additional readings and information sources.

Please note: CPD 101 does not focus solely on hotel valuation or property tax assessment. The issues related to "business enterprise valuation" for these contexts are touched upon briefly in this course, but are not explored in depth.

Course Outline

Foreword: Introduction to Professional Development Courses

  • Purpose and Scope of the Course
  • Prerequisites
    • Academic
    • Technical
    • Use of the Course Workbook
  • How to Access Your Real Estate Division CPD Course Website
  • Get to Know Your CPD Course Website
  • Log Out
  • Webinar
  • Final Quiz
  • Tutorial Assistance
  • Getting Started

Lesson 1: Business Valuation Fundamentals

  • Reasons Business Valuations are Required
    • Business Sale or Purchase
    • Transactions Among Shareholders
    • Dissolution
    • Matrimonial Disputes
    • Commercial Lending and Securitization of Debt
    • Estate Settlement
    • Ad Valorem Property Taxation
    • Income Tax
    • Expropriation
    • Dissenting Minority Shareholder Actions
    • Commercial Litigation
  • The Business Valuation Industry
  • Key Business Valuation Concepts
    • Price versus Value
    • Open versus Notional Market
    • Fair Market Value
  • Principles of Business Valuation
  • Business Valuation and Real Estate Appraisal
  • Business Valuation Due Diligence
    • Researching the Business
    • Financial Statements of a Business
    • Researching the Industry
    • Researching the Economy
  • Business Valuation Approaches
    • Comparable Sale or Market Method
    • Replacement Cost Approach
    • Asset-Based Approach
  • Going Concern Asset Valuations
    • Portfolio Considerations
    • Sale of Assets or Shares
    • Minority Interest
    • Minority Discount
    • Contingent Tax Liability
  • Summary
  • Review Questions

Lesson 2: Business Valuation Applications

  • Cash Flow/Income-Based Approaches
    • Industry Formula/Rules of Thumb
    • Capitalized Cash Flow Method
  • Case Study 2.1: Restaurant Valuation - Capitalization
    • Discounted Cash Flow (DCF) Method
  • Case Study 2.2: Video Store - Discounted Cash Flow
    • Capitalization of Income Method
  • Goodwill
    • Personal Goodwill
  • Valuation of Professional Practices
  • Case Study 2.3: Bookkeeping Valuation
  • Redundant Assets
  • Case Study 2.4: Bike Store - Redundant Assets
  • Intangible Assets
    • Brands
  • Preparing a Business Valuation
    • Initial Steps
    • Research and Background Study
    • Report
    • Letter of Representation
  • Case Study 2.5: Sample Business Valuation Report - Big Top Resort Ltd.
  • Summary
  • Review Questions

Afterword

  • The Final Quiz

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