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DEFINITIONS OF VALUE

Cost of Reconstruction New:

This is the cost necessary to reproduce the asset exactly in all respects and with all its current characteristics, such as dimensions, architectural details and finishes.  This value is also sometimes called reproduction cost.

Replacement Cost New:

For industrial buildings, this is the cost to buildings that, although not exactly the same originals in all respects, are able to provide the utility or benefits to the operations of the firm original buildings. With respect to machinery and equipment, this is the cost to purchase and install machines and equipment that, although not the same as the originals in all respects, are able to provide the same productive capacity as the original machinery and equipment.

Value in Current Use:

The value in current use is the value of all of the capital invested in the asset, considering its components, characteristics and remaining life, assuming that they continue in use in the same production context. Determination of value in current use requires particular attention to the evaluation of various types of depreciation such as those attributable to physical condition, state of maintenance and functional obsolescence. Determination of this value does not take into account the eventual occurrence of economic obsolescence leading to lack of profitability.  Value in current use can be thought of as the amount of investment capital that a purchaser would pay a seller under the assumptions that the prospective usefulness of the asset is sufficient to guarantee a fair return on the net invested capital and that the asset will continue to be used for the purpose for which it was purchased.

Liquidation Value:

Liquidation value is the value of the asset, assuming that the asset will be taken out of service because it ceases to produce a sufficient return.  This value is also a reference point for the definition of price attainable on sale.

Break-up Value or Salvage Value:

This value is the amount of money available from sale of the machinery and equipment in the commercial marketplace.  This value presumes that the asset will be broken down into pieces and then grouped by type of materials or parts and then sold in the specific markets for these materials.

Depreciated Value:

This is the value of the asset that is determined by beginning with the cost of reconstruction new and then subtracting all physical, functional and technological obsolescence.  This value does not consider the actual use of the asset or its capacity to generate a fair return on equity.

Keith T. Kallberg, P.E., General Manager

Roaring Brook Consultants, Inc.

15 Sewall Road

South Berwick, ME  03908

Toll Free:  877-722-2643

Fax:  207-384-5383

keith@rbc.mv.com

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