As you can see there are a few values that would apply. Here is some insight on this.
Here is a Case Study on the importance of the right Value
A company (unnamed to protect their dignity) hired an “appraiser” (auctioneer) to value their equipment. The company had nearly 2 million dollars worth of equipment at new cost and the equipment was between 10 and 5 years old. The auctioneer valued the equipment without asking or even realizing what the purpose of the valuation was and gave the company a report showing his values (Auction Value or Forced Liquidation Value). Here is where the problem happens. The bank received the appraisal directly to use as loan collateral validation for a refinance and upon seeing the value decided to play it safe and cut that number in half – not knowing that the auctioneer had already given the bottom dollar. Red flags go off about loan covenants and the loan committee decides to not approve the loan. Appraisal dollars wasted, initial loan fees wasted, relationship with the bank ruined.
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