Nearly all business appraisers are familiar with valuing Family Limited
Partnerships through the use of valuation discounts. The traditional methodology
employs the use of both the Asset-based and Market Approaches to Value. The
Non-Marketable Investment Company Evaluation (NICE) Method is an Income Approach
to value and does not rely upon valuation discounts. The NICE method is designed
especially to determine the fair market value of interests in FLP's by taking
into account investment risks and embodying them into the appropriate cost of
capital for the subject interest. The NICE method relies upon Modern Portfolio
Theory to solve for the price at which the willing seller and willing buyer
would transact for the interest in view its risks and expected returns. This is,
in fact, what investors in the marketplace actually do every day.
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*Disclaimer: The opinions expressed in this presentation are that of the
presenter(s) and do not necessarily reflect the views and opinions of the
American Society of Appraisers.
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