corporate brand valuation: residual contribution method

Business Enterprise Valuation

Monetary and Tangible Asset Isolation

Accounting Intangibles (Excluding Brand)

Non‐Accounting Intangibles

(Excluding Brand)

Pure Goodwill Residual and

Implied Royalty on Brand

Revaluation of Primary

Intangibles with CAC to Brand

B = GP + RB

Residual Contribution Method

Copyright © 2015 Beacon Valuation Group LLC 1

Presented by:

René Hlousek, ASA‐BV/IA, MRICSBeacon Valuation Group LLC

San Francisco, CA • Guam, U.S.A.

What is Corporate Brand……...from a Valuation Standpoint? Universe of Attempts to Value Brand – Traps & Shortcomings

Moving Beyond Current Threshold: Residual Contribution Method Tapping into the Wealth of Financial Reporting Valuation Concepts Setting Boundaries for Asset Group Values Value Drivers: Examination of Accounting vs. Non‐Accounting Intangibles Purification of Goodwill – Application of Filters Key Step toward Valuing Brand: Exclude it First! Path to Brand Royalty Rate – Without the Reliance on Generic Market Data Isolating, Extracting, and Unifying Residuals – The Essence of Brand Value

Practical Overview of Analytical Flow and Synthesis

Appendix: About the Presenter


Corporate brand, as opposed to product brands, is a single umbrella image that groups together the experiences, values, and images of a corporation’s panoply of activities.

Can be depicted as a network of knowledge about a company stored in the mind of the target communities such as: Customers, employees, shareholders, investors, journalists, analysts, business partners, and competitors

Although a corporate brand is defined partly by identifiable intangible assets, such as a company trade name, trademark, or logo, all of which can be legally protected, the greatest value of a corporate brand is even more intangible than these assets.

Unlike product brands, or other intangible assets held by a company, corporate brands cannot be separated from the rest of the assets, without substantially diminishing the value of the majority of the company’s intangible assets or the overall business enterprise housing them.

Brand equity is a phrase used in the marketing industry which describes the value of having a well‐known brand name, based on the idea that the owner of a well‐known brand name can generate more money from products with that brand name than from products with a less well known name.


The term Goodwill is defined by different bodies in ways that differsignificantly.

IRS Glossary to Publication 551 ‐ defines goodwill as “the value of a trade orbusiness based on expected continued customer patronage due to its name,reputation, or any other factor.” [NOTE THE SIMILARITY TO DEFINITION OF“BRAND”]

The International Glossary of Business Valuation Terms defines goodwill as“that intangible asset arising as a result of name, reputation, customer loyalty,location, products, and similar factors not separately identified.” [NOTE THESIMILARITY TO DEFINITION OF “BRAND”]

Goodwill derived from financial reporting (accounting) guidance as “thepremium that a buyer would be willing to pay for an entity over the net of theamounts assigned to assets and liabilities of the business. This “premium”amount recognized as goodwill includes acquired intangible assets that do notmeet the economic criterion for recognition as assets apart from goodwill.”


Does not consider brand earnings potential Fails to distinguish strategic/financial component of brand value from legal aspects

of ownership Overreliance on incomparable market data Quantitative relation between a specific brand element and a financial metric has

not been established Qualitative relation (awareness impacts loyalty) is more common sense than

science, and provides only little practical use for the valuation community Point systems, although providing valuable marketing data to brand managers, are

highly dependent on the relevance of their surveys and target audiences to the key valuation drivers of a corporate brand

More applicable to single product brands – not corporate Inappropriate inclusion/exclusion of brand value drivers Does not examine influence on/from intangibles other than brand Does not remove/reduce subjectivity – only moves it Does not incorporate the full spectrum of risk inherent in the different asset groups

employed by the business enterprise






(Excluding Brand)



Revaluation of Primary Intangibles with CAC to

Brand

B = GP + RB



FMV of Long Term Interest Bearing Debt

+

FMV of EquityFMV of

Intangible Assets

FMV of Tangible Assets

+

Net Working Capital

+

FMV Value of Invested Capital

= =

Investing Approach Operating Approach


BEV = MA + TA + IA, where: BEV = Business Enterprise Value MA = Monetary (financial) Asset Value (Net Working Capital) TA = Tangible (fixed) Asset Value IA = Intangible Asset Value (including Accounting Goodwill)

By default, the BEV represents the upper limit of value for any one or all ofthe asset (categories) housed by the entity

Of the three approaches to value the enterprise (cost, market, andincome), the multi‐period discounted cash flow (“DCF”) method withinthe income approach is most reliable when setting the basis (upper limit)for the valuation of a corporate brand, since it directly captures theexpected risk‐adjusted economic benefit stream (and its relevantcomponents) generated by the entire portfolio of assets associated withthis key intangible.


Company XYZBusiness Enterprise Value Model

Multiple Period Discounting Method - Discounted Cash Flow AnalysisTerminal

($000's) 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 Value

Revenues $1,360,000 $1,468,800 $1,571,616 $1,665,913 $1,749,209 $1,819,177 $1,873,752% Growth 8.0% 7.0% 6.0% 5.0% 4.0% 3.0%

EBIT $108,800 $132,192 $157,162 $166,591 $174,921 $181,918 $187,375% of Revenue 8.0% 9.0% 10.0% 10.0% 10.0% 10.0% 10.0%

Provision for Income Taxes 40.0% $43,520 $52,877 $62,865 $66,637 $69,968 $72,767 $74,950

Net Income $65,280 $79,315 $94,297 $99,955 $104,953 $109,151 $112,425

Plus: Depreciation & Amortization $13,600 $29,376 $31,432 $33,318 $34,984 $36,384 $37,475Less: Increase in Working Capital @ 10.0% $4,080 $10,880 $10,282 $9,430 $8,330 $6,997 $5,458Less: Capital Expenditures $13,600 $29,376 $31,432 $33,318 $34,984 $36,384 $38,599

Net Free Cash Flow $61,200 $68,435 $84,015 $90,525 $96,623 $102,154 $105,843 $109,019

Partial Period Adjustment 0.583 1.000 1.000 1.000 1.000 1.000 1.000 1.000

Net Free Cash Flow (adjusted) $35,700 $68,435 $84,015 $90,525 $96,623 $102,154 $105,843 $109,019

Discount Rate 12.0%Long-term Growth Rate 3.0%Valuation Date 5/31/2015

Years to Discount 0.583 1.583 2.583 3.583 4.583 5.583 6.583 6.583 Mid-Year Adjustment 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5Adjusted Years to Discount 0.292 1.083 2.083 3.083 4.083 5.083 6.083 6.083

Terminal Value $1,211,318

Sum of the PV Interim Cash Flows $396,612 $34,539 $60,529 $66,347 $63,829 $60,829 $57,420 $53,120

PV of the Terminal Value $607,925

Present Value of Total Invested Capital $1,004,538Less: Interest-Bearing Debt $0Unadjusted Estimated Value of Equity $1,004,538

Fair Value of Equity (rounded) $1,000,000


IA (Including Goodwill) = BEV – (MA + TA)

Subtracting monetary and tangible asset values from the BEV establishes the maximum value allocable to Corporate Brand

The next step in applying the Residual Contribution method is to “filter out” all elements included within the Intangible Asset Group value that are not a component of, or driven by, the entity’s Corporate Brand


Intangible Assets (IA)

IAA

IAA(Xb) TM(b)

GA

IAXA(Xb)

Rx =[ RMA + RTA +

RIA(XB) +

RB(i) ]

GP

IA = Intangible Asset Value GP = Pure Goodwill ValueIAA = Discretely Identifiable Accounting Intangible Assets RX = Returns on Assets Not Allocated to Any Specific Asset GroupIAA(Xb) = IAA, excluding Brand Value Elements RMA = Return on Monetary Contributory AssetsTM(b) = Trademark Value as Measured for Financial Reporting (Accounting) Purposes RTA = Return on Tangible Contributory AssetsGA = Accounting Goodwill Value RIA = Return on Intangible Contributory AssetsIAXA = Intangible Assets Not Measured for Financial Reporting (Accounting) Purposes RIA(Xb) = Return on Intangible Contributory Assets Other than Corporate BrandIAXA(Xb) = IAXA, excluding Brand Value Elements RB(i) = Return on Corporate Brand's Intrinsic Component

Location of Corporate Brand Value ElementsCopyright © 2015 Beacon Valuation Group LLC

13

For a discrete intangible asset to exist from a valuation or economicperspective, typically it should possess certain attributes. The morecommon attributes include that the asset may:

Be subject to specific identification and recognizable description. Be subject to legal existence and protection. Be subject to the right of private ownership, and this private ownership may

be legally transferable. Include some tangible evidence or manifestation of the existence of the

intangible asset (for example, a contract, a license, or a set of financialstatements).

Have been created or have come into existence as an identifiable item or asthe result of an identifiable event.


For a discrete intangible asset to have a quantifiable value in terms ofan economic analysis or appraisal, it should possess certain additionalattributes. Some of the additional attributes include the following:

It should generate some measurable amount of economic benefit to itsowner; this economic benefit could be in the form of an income incrementor of a cost decrement; this economic benefit is sometimes measured bycomparison to the amount of income otherwise available to the intangibleasset owner (for example, the business) if the subject intangible asset didnot exist.

It should be able to enhance the value of the other assets with which it isassociated; the other assets may encompass all other business assetsincluding tangible personal property, tangible real estate, or otherintangible assets.


Marketing‐related Typically assets used in the marketing or promotion of products or services Trademarks, domain names, newspaper mastheads, …..

Customer‐related Relating to existing customer relationships Customer lists, order backlogs, …..

Artistic‐related Arising from legal rights such as those provided by copyright Plays, operas, literary works, musical works, …..

Contract‐based Arising from contractual agreements Value‐added reseller channels, OEM agreements, favorable supply agreements, …..

Technology‐based Relate to innovations or technological advances Patented or non‐patented technology, IPR&D, databases, trade secrets, …..


$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

95.0%80.0%

67.9%58.3%

50.4%44.1%

38.9% 35.0% 31.5% 28.4% 25.5% 23.0% 20.7% 18.6% 16.7% 15.1% 13.6% 12.2% 11.0% 9.9%5.0%

20.0%32.1%

41.7%49.6%

55.9% 61.1% 65.0% 68.5% 71.6% 74.5% 77.0% 79.3% 81.4% 83.3% 84.9% 86.4% 87.8% 89.0% 90.1%

Existing Customers Future Customers

Discretely Identifiable Intangible

Component of Accounting Goodwill


Corporate Brand Value is directly manifested through the entity’s Primary Income Generating Asset(s) (“PIGA”), such as Customer Relationships, and the revenue and associated cash flows generated by this intangible.

When customer relationships represent the entity’s primary income generating asset, the future economic benefit stream associated with a Corporate Brand can be quantified through (extracted from) a systematic examination of the value components embedded within the entity’s existing customer relationships (discretely identifiable accounting intangible) and future customer relationships (generally a component of accounting goodwill).


The key is to focus on the corporate brand value components embedded within (manifested through) the entity’s primary income generating asset – this could also be the Company’s technology‐based intangibles (existing and future technology) as opposed to customer‐related intangibles.

The example we will use assumes that customer relationships (existing and future) are the entity’s primary income generating asset, representing 100% of the Company’s future revenue/income stream.

To capture the entire future economic benefit stream associated with a Corporate Brand, we must value both existing customer relationships (limited economic life ‐ IAA) and future customer relationships (indefinite economic life assuming a going concern business ‐ IAXA)


Represents a variation of the discounted cash flow model. The excess earnings method was first used in the 1920's to estimate the value of

intangibles lost when liquor manufacturers were shut down by Prohibition.

Earnings‐based valuation model attributes: Projection of earnings typically spans over a finite life (economic life of

technology). A return on contributory assets is subtracted from net income (unlike in

traditional DCF‐based models). The amount in excess of net income is the basis of the asset value. The earnings stream can therefore be broken down into two components: 1)

Normal return on tangible and intangible assets; and 2) an “excess” amount.

By separating the valuation problem into two parts, EEM focuses attention onthe factors that create value for a firm.

Most appropriate for primary income generating or enabling intangible assets(such as customer relationships).


Company XYZValuation of Existing Customer Relationships - IA A

Multi-Period Excess Earnings Method

($000's) 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2034year 1 2 3 4 20

Total Customer Revenue (Existing & Future) $1,360,000 $1,468,800 $1,571,616 $1,665,913 $2,751,668Revenue Growth 8.0% 7.0% 6.0% 3.0%

Existing Customer Relationship Revenue $1,292,000 $1,174,428 $1,067,555 $970,408 $272,071

EBIT Margin 8.0% 9.0% 10.0% 10.0% 10.0%Add: Sales & Marketing Expense on New Accounts 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%Adjusted EBIT Margin 9.0% 10.0% 11.0% 11.0% 11.0%

EBIT $116,280 $117,443 $117,431 $106,745 $29,928

Less: Return on Trade Names @ 0.00% $0 $0 $0 $0 $0

Pretax Income $116,280 $117,443 $117,431 $106,745 $29,928

Provision for Income Taxes 40.0% $46,512 $46,977 $46,972 $42,698 $11,971

Net Income $69,768 $70,466 $70,459 $64,047 $17,957

Less: Return on Working Capital $6,460 $5,872 $5,338 $4,852 $1,360Less: Return on Fixed Assets $5,362 $4,874 $4,430 $4,027 $1,129Less: Return on Assembled Workforce $6,202 $5,637 $5,124 $4,658 $1,306

Total Return on Contributory Assets $18,023 $16,383 $14,892 $13,537 $3,795CAC as a % of Existing Customer Revenue 1.40% 1.40% 1.40% 1.40% 1.40%

Cash Flow Attributable to the Customer Relationships $51,745 $54,082 $55,566 $50,510 $14,161

Partial Period Adjustment 0.583 1.000 1.000 1.000 1.000

Cash Flow Attributable to Customer Relationships $30,184 $54,082 $55,566 $50,510 $14,161

Discount Rate 15.0%Valuation Date 5/31/2015

Years to Discount 0.583 1.583 2.583 3.583 19.583 Mid-Year Adjustment 0.5 0.5 0.5 0.5 0.5Adjusted Years to Discount 0.292 1.083 2.083 3.083 19.083

Present Value of Cash Flows $28,979 $46,484 $41,530 $32,827 $984

Sum of PV Cash Flows $275,789

FMV of Existing Customer Relationships (rounded) $280,000


Intangibles and Intangible Elements Included in Accounting Goodwill: Assembled Workforce Future Customers Future Technology‐based Intangibles

Future Patents Next Generation Technology Know‐how Internal Technology

Future Strategic Contractual Intangibles or Non‐Contractual Relationships Other Future Intangibles

Marketing‐based that are Unrelated to the Company’s Corporate Brand Future Non‐compete Agreements Artistic and Other Less Likely Intangible Assets


Other Intangible Elements Included in Accounting Goodwill:

Returns on Assets Not Allocated to Any Specific Asset Group (RX) Returns on Monetary Contributory Assets (RMA) Returns on Tangible Contributory Assets (RTA) Returns on Intangible Contributory Assets (RIA)

Returns on Intangible Contributory Assets Other than Corporate Brand (RIA(Xb)) Returns on Corporate Brand's Intrinsic Component (RB(i))

Portion of Company’s Going Concern Value Outside of the Economic Life ofIntangibles Separately Valued If a combination of the mutually exclusive cash flows of the primary income generating

assets of the business enterprise already fully captures the entire economic benefit stream tobe generated by the entity into perpetuity, then it can be assumed that all of the goingconcern value of the business is already captured within the value of those primary assets.

Valuing both existing customer relationships (assuming a finite life) and future customers(assuming indefinite/infinite life), representing the residual from the overall business afterdeduction for existing customers, fully allocates the going concern value of the businessenterprise to these two assets. (This of course assumes that 100% of the business is driven by theCompany’s customers.)


Company XYZValuation of Future Customer Relationships - IA XA


($000's) 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2034year 1 2 3 4 20


Existing Customer Relationships Revenue $1,292,000 $1,174,428 $1,067,555 $970,408 $272,071Percent of Total 95.0% 80.0% 67.9% 58.3% 9.9%

Future Customer Relationships Revenue $68,000 $294,372 $504,061 $695,505 $2,479,597Percent of Total 5.0% 20.0% 32.1% 41.7% 90.1%

EBIT Margin [3] 8.0% 9.0% 10.0% 10.0% 10.0%Add: Sales & Marketing Expense on Existing Accounts 0.50% 0.5% 0.5% 0.5% 0.5% 0.5%Adjusted EBIT Margin 8.5% 9.5% 10.5% 10.5% 10.5%

EBIT $5,780 $27,965 $52,926 $73,028 $260,358

Less: Return on Trade Names @ 0.00% $0 $0 $0 $0 $0

Pretax Income $5,780 $27,965 $52,926 $73,028 $260,358


Net Income $3,468 $16,779 $31,756 $43,817 $156,215

Less: Return on Working Capital $340 $1,472 $2,520 $3,478 $12,398Less: Return on Fixed Assets $282 $1,222 $2,092 $2,886 $10,290Less: Return on Assembled Workforce $326 $1,413 $2,419 $3,338 $11,902

Total Return on Contributory Assets $949 $4,106 $7,032 $9,702 $34,590CAC as a % of Future Customer Revenue 1.40% 1.40% 1.40% 1.40% 1.40%




Discount Rate [6] 17.0%Valuation Date 5/31/2015


Present Value of Cash Flows $1,404 $10,691 $17,827 $21,023 $6,079


FMV of Future Customer Relationships (rounded) $280,000


Goodwill is the favor or prestige that a business has acquired beyond the mere value of what it sells.

Goodwill amount represents the premium that a hypothetical buyer would be willing to pay for a company, in excess of the total value of its underlying monetary, intangible, and identifiable intangible assets.

The fact that a hypothetical buyer would be willing to pay this premium suggests that the company has developed an identifiable corporate brand, and hence, goodwill with its stakeholders.

In essence, Pure Goodwill ‐ pure in a sense of not including any other accounting or non‐accounting intangible asset value ‐ is a fundamental component of Corporate Brand.


Fair Value % of BEVBEV $1,000,000 100.0%

Less: Working Capital $70,000 7.0%Less: Return on NWC (Existing Customers) $30,493 3.0%Less: Return on NWC (Future Customers) $28,675 2.9%

Less: Fixed Assets $30,000 3.0%Less: Return on NFA (Existing Customers) $25,309 2.5%Less: Return on NFA (Future Customers) $23,801 2.4%

Less: Existing Customer Relationships $280,000 28.0%Less: Future Customer Relationships $280,000 28.0%

Less: Trade Names - RFR Method (Excluded) $0 0.0%

Less: Assembled Workforce ("AWF") $55,000 5.5%Less: Return on AWF (Existing Customers) $29,273 2.9%Less: Return on AWF (Future Customers) $27,528 2.8%

Less: Return on Brand (Existing Customers) $0 0.0%Less: Return on Brand (Future Customers) $0 0.0%

Equals: GP (Intrinsic Component of Corporate Brand) $119,921 12.0%

Pure Goodwill = BEV - All Intangibles (IAA + IAXA) - Unallocated Returns on Assets



Company XYZTrademark / Trade Name Portfolio Valuation

Calculation of Implied Royalty Rate for Intrinsic Component of Corporate BrandRelief from Royalty Method

($000's) Forecasted period Terminal2015 2016 2017 2018 2019 2020 2021 Year

Calculation of Royalty Savings:

Total Revenues $1,360,000 $1,468,800 $1,571,616 $1,665,913 $1,749,209 $1,819,177 $1,873,752

IterateRoyalty Rate 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10%Royalty Savings $14,960 $16,157 $17,288 $18,325 $19,241 $20,011 $20,611

Provision for Income Taxes $5,984 $6,463 $6,915 $7,330 $7,696 $8,004 $8,244

Net Royalty Savings $8,976 $9,694 $10,373 $10,995 $11,545 $12,007 $12,367 $12,614

Partial Period Adjustment 0.583 1.000 1.000 1.000 1.000 1.000 1.000 1.000

Net Royalty Savings (adjusted) $5,236 $9,694 $10,373 $10,995 $11,545 $12,007 $12,367 $12,614

Capitalized Value for Residual Year (CVRY) $140,155


Years to Discount 0.583 1.583 2.583 3.583 4.583 5.583 6.583 6.583Mid-Year Adjustment 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5Adjusted Years to Discount 0.292 1.083 2.083 3.083 4.083 5.083 6.083 6.083

Present Value of Net Royalty Savings $5,066 $8,574 $8,191 $7,752 $7,268 $6,749 $6,206 $70,340

Present Value of Net Royalty Savings $49,807Present Value of CVRY $70,340

After Tax Value $120,147Solve for:

Value of Brand Component (rounded) $120,000 119,921


Company XYZValuation of Existing Customer Relationships - IA A


($000's) 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2034year 1 2 3 4 20


Existing Customer Relationship Revenue $1,292,000 $1,174,428 $1,067,555 $970,408 $272,071

EBIT Margin 8.0% 9.0% 10.0% 10.0% 10.0%Add: Sales & Marketing Expense on New Accounts 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%Adjusted EBIT Margin 9.0% 10.0% 11.0% 11.0% 11.0%

EBIT $116,280 $117,443 $117,431 $106,745 $29,928

Less: Return on Brand Component @ 1.10% $14,212 $12,919 $11,743 $10,674 $2,993

Pretax Income $102,068 $104,524 $105,688 $96,070 $26,935


Net Income $61,241 $62,714 $63,413 $57,642 $16,161

Less: Return on Working Capital $6,460 $5,872 $5,338 $4,852 $1,360Less: Return on Fixed Assets $5,362 $4,874 $4,430 $4,027 $1,129Less: Return on Assembled Workforce $6,202 $5,637 $5,124 $4,658 $1,306

Total Return on Contributory Assets $18,023 $16,383 $14,892 $13,537 $3,795CAC as a % of Existing Customer Revenue 1.40% 1.40% 1.40% 1.40% 1.40%






Present Value of Cash Flows $24,203 $39,822 $36,264 $28,664 $859


FMV of Existing Customer Relationships (rounded) $240,000


Company XYZValuation of Future Customer Relationships - IA XA


($000's) 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2034year 1 2 3 4 20


Existing Customer Relationships Revenue $1,292,000 $1,174,428 $1,067,555 $970,408 $272,071Percent of Total 95.0% 80.0% 67.9% 58.3% 9.9%

Future Customer Relationships Revenue $68,000 $294,372 $504,061 $695,505 $2,479,597Percent of Total 5.0% 20.0% 32.1% 41.7% 90.1%

EBIT Margin [3] 8.0% 9.0% 10.0% 10.0% 10.0%Add: Sales & Marketing Expense on Existing Accounts 0.50% 0.5% 0.5% 0.5% 0.5% 0.5%Adjusted EBIT Margin 8.5% 9.5% 10.5% 10.5% 10.5%

EBIT $5,780 $27,965 $52,926 $73,028 $260,358

Less: Return on Brand Component @ 1.10% $748 $3,238 $5,545 $7,651 $27,276

Pretax Income $5,032 $24,727 $47,382 $65,378 $233,082


Net Income $3,019 $14,836 $28,429 $39,227 $139,849

Less: Return on Working Capital $340 $1,472 $2,520 $3,478 $12,398Less: Return on Fixed Assets $282 $1,222 $2,092 $2,886 $10,290Less: Return on Assembled Workforce $326 $1,413 $2,419 $3,338 $11,902

Total Return on Contributory Assets $949 $4,106 $7,032 $9,702 $34,590CAC as a % of Future Customer Revenue 1.40% 1.40% 1.40% 1.40% 1.40%




Discount Rate [6] 17.0%Valuation Date 5/31/2015


Present Value of Cash Flows $1,154 $9,052 $15,428 $18,195 $5,261


FMV of Future Customer Relationships (rounded) $240,000

Fair Value % of BEVBEV $1,000,000 100.0%

Less: Working Capital $70,000 7.0%Less: Return on NWC (Existing Customers) $30,493 3.0%Less: Return on NWC (Future Customers) $28,675 2.9%

Less: Fixed Assets $30,000 3.0%Less: Return on NFA (Existing Customers) $25,309 2.5%Less: Return on NFA (Future Customers) $23,801 2.4%

Less: Existing Customer Relationships $240,000 24.0%Less: Future Customer Relationships $240,000 24.0%

Less: Trade Names - RFR Method (Excluded) $0 0.0%

Less: Assembled Workforce ("AWF") $55,000 5.5%Less: Return on AWF (Existing Customers) $29,273 2.9%Less: Return on AWF (Future Customers) $27,528 2.8%

Less: Return on Brand (Existing Customers) $67,084 6.7%Less: Return on Brand (Future Customers) $63,086 6.3%

Equals: GP (Intrinsic Component of Corporate Brand) $69,751 7.0%

Pure Goodwill = BEV - All Intangibles (IAA + IAXA) - Unallocated Returns on Assets


Intangible Assets (IA)

IAA

IAA(Xb) TM(b)

GA

IAXA(Xb)

Rx =[ RMA + RTA +

RIA(XB) +

RB(i) ]

GP

IA = Intangible Asset Value GP = Pure Goodwill ValueIAA = Discretely Identifiable Accounting Intangible Assets RX = Returns on Assets Not Allocated to Any Specific Asset GroupIAA(Xb) = IAA, excluding Brand Value Elements RMA = Return on Monetary Contributory AssetsTM(b) = Trademark Value as Measured for Financial Reporting (Accounting) Purposes RTA = Return on Tangible Contributory AssetsGA = Accounting Goodwill Value RIA = Return on Intangible Contributory AssetsIAXA = Intangible Assets Not Measured for Financial Reporting (Accounting) Purposes RIA(Xb) = Return on Intangible Contributory Assets Other than Corporate BrandIAXA(Xb) = IAXA, excluding Brand Value Elements RB(i) = Return on Corporate Brand's Intrinsic Component

Location of Corporate Brand Value Elements

TM(b)


B = GP + RB

($000's)

Intrinsic Component of Corporate Brand (GP) $69,751

Add: Returns on Corporate Brand from Primary Intangibles (RB)Existing Customers $67,084Future Customers $63,086Other Intangibles $0

$199,921

Equals: Corporate Brand Value $200,000






(Excluding Brand)



Revaluation of Primary Intangibles with CAC to

Brand

B = GP + RB



René Hlousek, ASA-BV/IA, MRICSPresident and Managing Director

Beacon Valuation Group LLCE-mail: [email protected]

Asia-Pacific (Guam) OfficePhone: +1 671-653-5757

Fax: 671-653-5758P.O. Box 7930

Tamuning, GU 96931-7930

San Francisco (U.S.) OfficePhone: +1 415-357-1227

Fax: 415-357-1701350 Bay Street, Suite 100-366

San Francisco, CA 94133


corporate brand valuation: residual contribution method

Economy & Finance