Board Topic: transportation business Determine the Cap Rate
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transportation business

Posted by: ekim Dec 30 2004, 09:37 PM
I have a transportation company and need to know how establish a cap rate for it. Any knowledge of this?

Posted by: loanuniverse Dec 31 2004, 10:42 AM
Are you looking for a valuation? Usually for an operating company, which seems to be what you are indicating that you won a cap rate is not used. Cap rates are used mostly on real estate valuations using the income approach once you get the “Net Operating Income” of the property you divide that number by a the cap rate to get a value.

I think that for a “transportation company” {not sure if you mean trucking, freight forwarder, taxis or something else} you need to take a look at a valuation method such as “discounted cash flow” to make sure that the required investments in plant, property and equipment.

On the other hand, I guess you could use a percentage as one of those “rule of thumb” valuation rules, but in that case going to an industry specific source would be the best bet. For example, a trucking company might want to go to a “trucking industry” site to see what they say about market valuations.
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