To determine the price of fixed assets of the company, plant & machinery valuation is conducted. Valuations of Plant & Machinery are generally beneficial to such person who intends to buy or sell the plant & machinery and also for financial reporting and auditing.

There are generally two types of approaches used in valuation of plant & machinery of any business namely the Market Approach and the Depreciation Replacement Cost (DRC) or the Cost Approach and the Income Approach or the combination of any mentioned approach. The suitability of kind of approaches used for valuation would entirely depend upon the purpose of valuation and the information about the Company is readily available for valuation purpose.

The Market Approach is most popular method of valuation of Plant & Machinery.

Methods of shares/stock valuation

1. The Depreciation Replacement Cost/ Cost Approach

   The Depreciation Replacement Cost method is used by depreciating the new replacement price / cost of the machine by estimating its age, economic life and residual value, in order to derive its current value.

2. The Income Approach

   Income Approach is a method of valuation used to determine the value of plant & machinery where income stream is directly attributable to such plant & machinery. This approach is widely used in the valuation of Intangible assets such as goodwill.

3. The Market Approach

   The Market approach is used in determining the value of such plant & machinery by scrutinising the transaction of identical or similar items selling in the market.
   The basis of Valuation for Plant & Machinery Valuation could be

   • The Market Approach The estimated amount which the buyer and seller is willing to exchange for such asset at valuation date.
   • Fair Value The value at which the seller would receive after sale of such asset in a transaction between market participants at valuation date.
   • Equitable Value The estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interests of those parties.