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Valuation of IP based on a royalty stream

Wednesday, January 24, 2018 @ 8:25 AM | By Peter Neelands and Suzy Lendvay

Challenges arise in the valuation of intellectual property (IP) due to a number of factors, including: difficulties in estimation of cash flows to be generated from the IP’s use or licensing, particularly for early-stage or disruptive IP; tax considerations due to the ease of migration of IP; and selection of an appropriate discount rate and the quantification of risk.

One common approach to value IP is the relief from royalty method. The relief from royalty method determines the value of IP as the present value of...