Week VIII Assignment. Traditional valuation methods.

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Table of Contents
Introduction3
Traditional valuation method3
Income Approach
Market Approach
Cost Approach
Value investing4
Diversification4
Conclusion4
References5
Introduction
           The Bennington Corporation favors value investing as its main strategy in making investment decisions. This corporation manages the risks that investing in a company entails by thoroughly looking at different aspects of the company which might affect its value. The main key aspects that Bennington Corporation looks into aside from the ability to generate income are its company history, the value of securities, price, and company quality. It is also important to Bennington Corporation to be well-versed with how the potential investment works. However, there are some concepts that Bennington Corporation does not find compelling such as short-term investing, diversification, and mergers. In this paper, the investing strategy of Bennington Corporation will be discussed and compared to traditional valuation methods
Traditional valuation methods
           The fundamental valuation approaches are the following: the income approach, market approach, and cost approach. These approaches can be combined and are not exclusive, but these are the basics (Mooya, 2016). The income approach is mainly using the economic principle of expectation. This approach focuses on assumed future cash flow from the investment, based on the assessment of the current state of the company and the risks. The market approach, on the other hand, focuses on the real market, applying the economic principle of competition. The equilibrium of the business price where the price is for the best interest of both parties. With this being said, this price is the rate where the buyer to buy, and the seller is willing to sell the stock, commodity, etc. The next approach is the cost approach, or also known as the asset approach, which uses the principle of substitution. Value is ...