Asset Valuations & Risk Assessment

The understanding of asset value is vital to making rational asset and capital decisions. This includes acquisitions, divestitures, retrofits or retirement of assets. L.E. Peabody & Associates, Inc. uses several methods to value the current worth of assets, including the income approach, cost approach and comparable sales.

Since critical asset decisions need to also consider the range of an asset’s risk and opportunity, we typically employ an income approach to asset valuation based on real option analysis. This approach considers the extrinsic value inherent in having the option, but not the obligation to undertake certain business initiatives under uncertain market conditions. A common application of this approach is for the valuation of electric generating assets, where an asset owner has the option to start or stop a power plant depending on market conditions. Our models consider operating flexibility as well as market uncertainty around correlated variables to calculate the extrinsic value of assets. Our approach relies on "Monte Carlo" simulation which replicates decision making under varied market conditions to arrive at an expected value of an asset and to define a probability distribution around expected results.

L.E. Peabody & Associates, Inc. has experience with valuing electric power generating assets, energy commodity contracts, transportation infrastructure, railroad equipment fleets as well as entire companies. With more and more reliance on embedding optionality in economic decisions, we offer the ability to price optionality whether it is related to a physical asset or a contract with reopeners, early termination rights or volume flexibility. Our valuations rely not only on sophisticated tools but also on the business acumen needed to understand markets and the drivers that impact client value.
Asset Valuation

Examples of Asset Valuation Experience …
  • Electric power generating facility real option valuations
  • Value of service and commodity contracts with embedded optionality
  • Railroad equipment lease versus buy analyses
  • Property tax assessments

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