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THE VALUATION OF VARYING INCOMES 2

THE VALUATION OF VARYING INCOMES 2 About 20 years ago it was recognised that an anomaly could arise in the application of the dual rate method of valuation where the income varied during the term, and in subsequent years various methods of modifying the dual rate calculation were proposed, including the Double Sinking Fund Method A. W. Davidson, and the Annual Equivalent and Sinking Fund Methods M. J. Greaves. A further alternative, Pannell's method, has also been suggested, but it is not considered here. These three methods give somewhat differing results as demonstrated by Baum and Mackmin,1 since the underlying assumptions are different. These latter authors came to the conclusion that the Double Sinking Fund Method DSF in particular could result in a degree of overvaluation and the purpose of this paper is to examine the reasons for this. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Valuation Emerald Publishing

THE VALUATION OF VARYING INCOMES 2

Journal of Valuation , Volume 1 (4): 7 – Apr 1, 1983

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0263-7480
DOI
10.1108/eb007940
Publisher site
See Article on Publisher Site

Abstract

About 20 years ago it was recognised that an anomaly could arise in the application of the dual rate method of valuation where the income varied during the term, and in subsequent years various methods of modifying the dual rate calculation were proposed, including the Double Sinking Fund Method A. W. Davidson, and the Annual Equivalent and Sinking Fund Methods M. J. Greaves. A further alternative, Pannell's method, has also been suggested, but it is not considered here. These three methods give somewhat differing results as demonstrated by Baum and Mackmin,1 since the underlying assumptions are different. These latter authors came to the conclusion that the Double Sinking Fund Method DSF in particular could result in a degree of overvaluation and the purpose of this paper is to examine the reasons for this.

Journal

Journal of ValuationEmerald Publishing

Published: Apr 1, 1983

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