On the premature sale of assets

Occupation: Principal Scientific Researcher
Affiliation: Central Economics and Mathematics Institute, Russian Academy of Sciences
Address: Moscow, Russian Federation

Journal name

Ekonomika i matematicheskie metody

Edition

Volume 59 no. 4

Pages

86-99

Abstract

Valuing non-financial assets, appraisers usually do not take into account that sometimes their owners need to sell them anticipatory (before the end of their service life). In addition, the sale of an asset provides for a certain marketing period (time to wait for a suitable buyer). We propose a model for assessment the market value of an asset, taking into account these circumstances, based on the Discounted Cash Flow method. The benefits (cash flows) generated by the asset when it is used for its intended purpose in the coming period are assumed to be known. However, in this model, we additionally accept that the premature sale is due to the detection of (real or perceived) threats of a local nature, i.e. related only to a specific asset and its owner. At the same time, we consider the moment of local threat detection and the duration of marketing period of the asset as random variables. The formulas obtained also allow to take into account the impact of inflation, removable failures of the asset and its depreciation during the marketing period.

Keywords

market value of non-financial asset, DCF method, asset life, exposure period, duration of asset ownership, premature sale, random marketing period, threats, inflation

Received

03.06.2023

Publication date

28.12.2023

Number of characters

45110

Cite

GOST	Smolyak S. On the premature sale of assets // Ekonomika i matematicheskie metody – 2023. – V. 59. – no. 4 C. 86-99 [Electronic resource]. URL: https://emm.jes.su/S042473880025875-1-1 (circulation date: 08.05.2024). DOI: 10.31857/S042473880025875-1
MLA	Smolyak, Sergey "On the premature sale of assets." Ekonomika i matematicheskie metody 59.4 (2023):86-99. DOI: 10.31857/S042473880025875-1
APA	Smolyak S. (2023). On the premature sale of assets. Ekonomika i matematicheskie metody 59(4), pp.86-99 DOI: 10.31857/S042473880025875-1

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