Television Station Valuation is primarily based on two techniques; Comparable Sales, and Discounted Cash Flow.
Comparable sales valuation considers recent sales of stations in both the local market area, and in other markets. Factors considered include: network affiliation, audience ratings, operating revenue, cash flow, competing stations, Incentive Auction, and market econometrics.
Discounted cash flow valuation involves the projection of revenues and cash flow from operation, excluding depreciation, and debt service. The projection period reflects the time span within which knowledgeable buyers expect to recapture their purchase price. Allowances are made for routine replacement of the capital plant. The future resale value is considered as a liquidating dividend for the investment. Cash flows are discounted to present value using a rate that reflects the blended cost of capital for the industry.