THE VALUATION OF VARYING INCOMES: 2

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 over‐valuation and the purpose of this paper is to examine the reasons for this.

Citation

BOWCOCK, P. (1983), "THE VALUATION OF VARYING INCOMES: 2", Journal of Valuation, Vol. 1 No. 4, pp. 366-372. https://doi.org/10.1108/eb007940