[wjsniper824]

Hi,

I have a question related to intangible asset valuation.
This is the question:

Justine Enterprises is attempting to value one of its product patents using the market approach. The balance sheet value of this patent is $35.0 million but based on its review of similar patent sale transactions, values of $32.5 million, $34.2 million, $36.6 million, and $39.3 million, respectively, were obtained. Assuming that the company uses a market (median value approach, what is the value recognized for the product patent?
A. $35.7 million
B. $35.4 million
C. $32.5 million
D. $35.0 million

Answer is B by removing $32.5 million and $39.3 million as outliers.
I simply added all four and divided by 4 and got the question wrong.
What is the standard of determining whether a value is outlier or not?

[Anonymous]

Would be also interested to know

[Big Mike]

Its using the “median value approach”, so the middle number. Since theres 4 numbers, you average the 2 middle ones.

Not sure why its called outliers

[Author]

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