The information below relates to the valuation of Michigan full service gasoline service stations.
Zeon Mobile:
Sale Price = $1,100,000
Net Operating Earnings = $700,000
Valuation Ratio = ?
GP Petro
Sale Price = $570,000
Net Operating Earnings = $310,000
Valuation Ratio = ?
a) The operating earnings of Phillips XT service station were $400,000 for the most recent year. Using all of the information above, produce an initial value estimate.
b) Describe concerns a skilled valuation analyst might have about the above estimate of value.
c) Explain how you could address the concerns above and improve your valuation estimate.