Estimation Of Current Market Value Of Ship †MyAssignmenthelp.com

Question: Discuss about the Estimation Of Current Market Value Of Ship. Answer: The estimation of current market value of any particular ship at specific time is known as ship valuation. Generally, ship evaluation is provided by ship brokerage company who acts as a negotiator between the buyer or charters and the seller. For the valuation of assets like ship, highly skilled and well-established knowledge is required. There are general guidelines that are followed to provide reasonable market value of ships(Iain Goldrein, 2012). The most widely used approach that are used for valuation of ships are as follows: Market approach In this process comparable ships with similar specifications, age, freight carrying capacity etc that has been recently sold is used as a reference to estimate value of a ship(Merikas, Sigalas, Karatzas, Drobetz, 2012). Here, the transaction made during the past sale of reference ship is used as a guideline to evaluate market value of the ship to be sold. Replacement cost In this approach ship value is estimated by assuming the current market cost to be paid in order to get a new ship that functions similarly as ship to be evaluated. In other words, in this method the value of the vessel is equated with the estimated cost required to replace the vessel. This method is mostly applied for the ships that are highly customized for some specific trades and projects. Such ships are very low in demands in sale environment. Income Approach In this method most of the interest for ship valuation is the present value consisting of all the net earnings of the vessel which it will generate during its remaining life with addition of the savage value. This is one of the most rigorous and widely accepted approach of calculating the value of the assets, including vessels, impending at proper inputs to the financial model which can impact in the valuation of the vessel. One of the major challenges in this approach is the projection of cargo revenue which is dependent on the market conditions of tonnage supply, its demand and also on the strategy of the buyers on chartering. The valuations request is often made by the banks, insurance company, national shipping lines, Government of different nations and other national or international agencies. The various reasons of valuations are listed below: As vessels can be used as a security for mortgage, so the bank need the assessment of the vessels to approve a loan application. During auction, the court needs to know the value of the vessel so that it can advise the creditors accordingly. While insuring the vessels its value is to be known. During company audit, it has to report to its shareholders regarding the value of the asset for which valuation is must. As an investment prospects, the owner can raise finance equal to the value of the asset. In case of the legal disputes, the value of vessels is determined for the settlement between the partners. Government policies or regulations. The valuations also happen in case the vessels are under shared or family ownership. Bibliography Iain Goldrein, M. H. (2012). Ship Sale and Purchase. Abingdon: Informa Law From Routledge. Merikas, A. G., Sigalas, C., Karatzas, B. M., Drobetz, W. (2012, 4). Valuation Models: A Practical Appraisal. Retrieved from Marine Money: https://www.academia.edu/6280106/Vessel_Valuation_Models_-_A_Practical_Appraisal_Merikas_Andreas_Sigalas_Christos_Drobetz_Wolfgang_Karatzas_Basil_M