<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The transactional assets pricing approach within valuation theory (TAPA) reviewed in this paper and developed by the authors, now more than a decade ago (<xref ref-type="bibr" rid="j_remav-2018-0008_ref_022_w2aab3b7b8b1b6b1ab1ac22Aa">MICHALETZ, ARTEMENKOV A. &amp; ARTEMENKOV L., (2007)</xref>, has found many applications in professional valuation practices dealing with illiquid assets (<xref ref-type="bibr" rid="j_remav-2018-0008_ref_015_w2aab3b7b8b1b6b1ab1ac15Aa">L<sc>eyfer</sc> 2006</xref>; <xref ref-type="bibr" rid="j_remav-2018-0008_ref_003_w2aab3b7b8b1b6b1ab1ab3Aa">A<sc>ndrews</sc> 2011</xref>)). Consequently, challenges have arisen to ascertain its performance and develop tools, on its basis, which can be employed by valuers in their everyday practice and which are aligned as much as possible with the income approach tools used by them in their professional work. This paper proposes modifications to the standard direct income capitalization technique to align it as closely as possible with the results derivable under the applications of the TAPA basic pricing formula. The authors develop the respective adjustments using the Taylor series expansion and then, using a simulation technique, outline the performance of the resulting modified (“quick”) income capitalization model against the TAPA benchmark. The findings indicate that such a modified (“quick”) income capitalization approach has reasonable accuracy, which makes it amenable to direct usage in valuation practice, given the described assumptions.</p></abstract>

The transactional assets pricing approach within valuation theory (TAPA) reviewed in this paper and developed by the authors, now more than a decade ago (MICHALETZ, ARTEMENKOV A. & ARTEMENKOV L., (2007), has found many applications in professional valuation practices dealing with illiquid assets (Leyfer 2006; Andrews 2011)). Consequently, challenges have arisen to ascertain its performance and develop tools, on its basis, which can be employed by valuers in their everyday practice and which are aligned as much as possible with the income approach tools used by them in their professional work. This paper proposes modifications to the standard direct income capitalization technique to align it as closely as possible with the results derivable under the applications of the TAPA basic pricing formula. The authors develop the respective adjustments using the Taylor series expansion and then, using a simulation technique, outline the performance of the resulting modified (“quick”) income capitalization model against the TAPA benchmark. The findings indicate that such a modified (“quick”) income capitalization approach has reasonable accuracy, which makes it amenable to direct usage in valuation practice, given the described assumptions.

The Transactional Assets Pricing Approach and Income Capitalization Models in Professional Valuation: Towards a “Quick” Income Capitalization Format

Real Estate Management and Valuation

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

The transactional assets pricing approach within valuation theory (TAPA) reviewed in this paper and developed by the authors, now more than a decade ago...

The Transactional Assets Pricing Approach and Income Capitalization Models in Professional Valuation: Towards a “Quick” Income Capitalization Format

Published Online: Apr 16, 2018

Page range: 89 - 107

DOI: https://doi.org/10.2478/remav-2018-0008

Keywords
Transactional Assets Pricing Approach, discount rates, Direct income capitalization, Gordon growth model, Inwood model, Ring model, Professional Valuation

© 2018 Vladimir B. Michaletz et al., published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

The Transactional Assets Pricing Approach and Income Capitalization Models in Professional Valuation: Towards a “Quick” Income Capitalization Format

Published Online: Apr 16, 2018

Page range: 89 - 107

DOI: https://doi.org/10.2478/remav-2018-0008

KeywordsTransactional Assets Pricing Approach, discount rates, Direct income capitalization, Gordon growth model, Inwood model, Ring model, Professional Valuation

© 2018 Vladimir B. Michaletz et al., published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
Transactional Assets Pricing Approach, discount rates, Direct income capitalization, Gordon growth model, Inwood model, Ring model, Professional Valuation