Income or cash flow serves as the basis for the value of the business or asset when this valuation approach is used.

Question

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The income approach values a business based on its ability to generate future cash flows. It considers the current income and growth potential of the business, which ultimately determines its value. The market approach looks at comparable transactions and the cost approach looks at the replacement or reproduction cost of the asset. The synergistic approach and Pratt's CPS approach are specialized methods of valuation.

Income or Cash Flow Serves as the Basis for the Value