Valuation methods in healthcare finance and leasing decisions

Healthcare Finance: DCF Versus the Market Multiple Approach

The DCF approach is considered as one of the best approaches for valuing a business. The approach is extensively sensitive to the forecasts made through an analysis process. Every adjustment that is made, even for the smallest ones, have the ability to let the DCF approach take a wide variance. The approach gives an assumption that the fair value has the possibility not to be accurate. DCF approach is time intensive as compared to other valuation techniques. It gives results whenever needed. The main ideas with this approach are that what is done is forecasting future performances even in cases where the business body does not have a 100% transparency. The DCF approach is a target that is not stagnant (Vinturella & Erickson, 2013). It is moving. In the case that the expectations of a company change, the fair value will take a responsive change accordingly.

Different factors lead to the selection of a good valuation approach. There is no way in which one model fits everything. The choice of the method to be used is done with consideration of the operator's expertise, time, resources, nature of the valuation to be done, type of the business or the company, among others (Vinturella & Erickson, 2013).

Question Two

These arguments are valid. Leasing lets the person avoid huge sums of money that would have been used to purchase the item. Leasing serves only for a few selected moments where the object has to be done. Buying the item would seem a liability if its intention were for a short time. for instance, leasing a car to transport an item, like a horse, from one city to another, would serve the person well since one does not have to buy the vehicle to use it for one service that is transporting the horse. Nonetheless, in the case that one is to use the material for a long time, an accumulated fee for leasing might come near the value involved in buying the item, and hence the advantage would be reduced increasingly ("Is Leasing a Car Right for You?" 2013).

Leasing enables people and organizations to use more debt because leasing keeps the liability off the books. Leasing gives on the credit of having to work off the books of debt as the service is simply covered on debt being used more. This is only applicable in cases where there is no debt involved with the leasing procedures. Liability has to be kept off the books at all times. Liabilities have to be depleted within a business process. Having liabilities would be a tall order for the business ("Is Leasing a Car Right for You?" 2013). Thus, it is necessary to have an approach that cuts short on the liabilities and creates more space for the companies to work on debts with no or limited liabilities if any. This happens through one method in leasing.

Question Four

I would prefer the Excessive Earnings Valuation Method as the method for asset-based valuation. This method offers an upgraded approach in dealing with asset valuation. The method is broader and applies several approaches that create a space of no complication in the management of the valuation process. The method is derived from the income and asset approaches. The method gives me a chance to look at the tangible assets besides a set of business liabilities. The method incorporates the use of assets and liabilities in a way that does not sink one into having to derive some of the profitable ways of carrying out the valuation of incrementally detailed aspects within a production process ("Asset-based valuation methods," 2012). The method offers the best approach in dealing with the determination of the right value for any business with goodwill directly. Such an approach is not possible or clear using the asset accumulation valuation method.

The method studies the earnings of the business. It considers the business earnings as the inputs giving its connection with the income approach. This strong approach gives this method a better hand when it comes to dealing with top companies having considerable goodwill. Its preference is also based on its simplicity, directness, effectiveness, and vast applicability unlike the other methods ("Asset-based valuation methods," 2012). Whenever other methods are superficial, this method offers the best approach to dealing with complicated processes in determining valuation.