One method of arriving at a figure of ‘maintainable profits’ which has been used in the past as a popular rule of thumb is to take an average of recent years’ profits and possibly a weighted average where the latest year has more influence than an earlier year. The weighting is intended to allow more recent profits to be given higher value, for example, if a valuation was being performed at the beginning of Year 4, a total would be calculated of three lots of Year 3 profits, two lots of Year 2 profits and one lot of Year 1 profits and then divided by six.

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