Valuation of an intangible asset can be a challenging task. Of the three valuation methods described in Section 6.3.6, why was the income approach recommended? Do you agree? Why?

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6.3.6 Valuation of intellectual property To some extent the approaches to valuation of intellectual property (patents, trade secrets) are similar to valuation of tangible assets (property, plant, equip- ment): there is precedent for application of cost, market, and income ap- proaches to valuation, and recommended practices and guidelines have emerged over time [28] [29] [3]. Still, some of the details, like market comparables or re- placement value, might be needed and hard to find for intellectual property, so extraordinary skill and soliciting multiple perspectives is essential. References such as Copeland et al. [30] and Yegge[23] provide excellent guidance for the analyst and have informed the present work. Table 6.4 provides a high-level comparison of factor differences. Factor Real Property Categorization Easy Context Independent Focus Specific Details Methodology Objective Intellectual Property Difficult Dependent Specific Concepts Subjective Table 6.4: Difference in key valuation factors between real property and intel- lectual property. The specific valuation approach (market, cost, or income) to use in each situation requires a pit of prodding thought, and judgment before a specific strategy can be recommended. It is a lot easier to say, "Find the approach that best indicates the value of the property," than it is to reduce to practice for a specific (often unique) IP situation. A strategy calling for "fair mar- ket" will have upper and lower bounds to value, and committing to a final