APPLE TREES AND EXPERIENCEIf market price is the last thing an investor or manager should look at in determining the value of a business or an ownership interest in it, the First thing to consider is its fundamental economic char-acteristics. There are so many approaches to appraising those fun-damentals that many people use the relatively lazy metric of market price as a guideline in valuation, but that is a mistake. Of all the approaches to appraising business value, just a few do virtually all the hard work, and those are the ones you need. A parable will illustrate the basics, and the rest of this part will rill in the details.' ttcl FOOLS AND WISDOM oft.sroc,,,( (-0x/44d-3 zidki Once there was a wise old man who owned an apple tree. It was a Fine tree, and with little care it produced a crop of apples each year which he sold for $100. The man wanted to retire to a new climate, and he decided to sell the tree. He enjoyed teaching a good lesson, and he placed an advertisement in the business opportunities section of The Wall Street Journal in which he said he wanted to sell the tree for "the best offer."SON1E RED HERRINGS The first person to respond to the ad offered to pay S50, which, he said, was what he could get for selling the apple tree For firewood after he cut it down. "You don't know what you are talking about," the.old man chastised. "You are offering to pay only the salvage value of this tree. That might be a good price for a pine tree or even this tree if it had stopped bearing fruit or if the price of apple wood had gotten so high that the tree was more valuable as a source of wood91
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