Intangible Asset Valuation

Income Methods

valuation_income_methods

Read-onlyIdempotent

Compute income-approach valuations for intangibles via relief from royalty, excess earnings, incremental cash flow, or contributory asset charges. Provide method and inputs to get the value.

Instructions

Income approach: relief from royalty, multi-period and single-period excess earnings, incremental cash flow, and contributory asset charges. Method selects the formula. Use for the income-approach arithmetic: relief_from_royalty for IP with observable royalty rates, and excess earnings (mpeem or single_period_excess_earnings) for the residual intangible. For a complete asset-specific valuation of customer, technology, IP or workforce assets, prefer the dedicated valuation_customer, valuation_technology, valuation_ip and valuation_human_capital tools. For royalty-rate inputs use valuation_royalty_analysis; for asset-specific income valuations use valuation_customer, valuation_technology, valuation_ip or valuation_human_capital; for cost or market indications use valuation_cost_approach and valuation_market_approach. Per method: relief_from_royalty needs revenue_projections + royalty_rate + discount_rate + tax_rate + useful_life (optional: tab_enabled); mpeem needs cash_flow_projections + contributory_asset_charges + discount_rate + tax_rate (optional: tab_enabled); single_period_excess_earnings needs normalized_earnings + contributory_asset_charges + capitalization_rate; incremental_cashflow needs cash_flows_with + cash_flows_without + discount_rate; contributory_asset_charges needs assets. cash_flow_projections and contributory_asset_charges must be period-aligned; cash_flows_with and cash_flows_without must be equal length. Only method is required; all other parameters are method-dependent — supply those the selected method names and omit the rest (defaults apply where defined). Rates and premiums are decimals (0.10 = 10%). Pure arithmetic: no I/O and no external calls, rounded to 2 decimals; parameters belonging to other methods are accepted and ignored. An unknown method, or a missing method-required parameter, returns an error instead of a value.

Input Schema

TableJSON Schema

Name	Required	Description
`assets`	No	Contributory assets, each {value, return_rate}.
`method`	Yes	Formula to apply. Options: relief_from_royalty = PV of after-tax royalties avoided by ownership.; mpeem = PV of excess earnings after contributory asset charges.; single_period_excess_earnings = Capitalize one period of excess earnings.; incremental_cashflow = PV of cash flows with the asset minus without it.; contributory_asset_charges = Total contributory asset charges.
`tax_rate`	No	Marginal tax rate as a decimal (0.25 = 25%).
`tab_enabled`	No	Whether to include the tax amortization benefit in the result.
`useful_life`	No	Useful life in years n (integer ≥ 1).
`royalty_rate`	No	Royalty rate as a decimal (0.05 = 5% of revenue).
`discount_rate`	No	Per-period discount rate as a decimal (0.10 = 10%).
`cash_flows_with`	No	Cash flows per period with the asset, in currency units.
`cash_flows_without`	No	Cash flows per period without the asset, in currency units.
`capitalization_rate`	No	Capitalization rate as a decimal (0.15 = 15%).
`normalized_earnings`	No	Single-period normalized earnings, in currency units.
`revenue_projections`	No	Projected revenue per period t=1..n, in currency units.
`cash_flow_projections`	No	Projected after-tax cash flows per period t=1..n, in currency units.
`contributory_asset_charges`	No	Contributory asset charge per period t=1..n, in currency units.

Output Schema

TableJSON Schema

Name	Required	Description
`error`	No	Error message when the call fails.
`steps`	No	Intermediate calculation steps for traceability (one string per step).
`value`	Yes	Computed valuation, rate, or metric.
`method`	No	Formula / method name that produced the result.
`assumptions`	No	Modelling assumptions applied (list of strings or key/value object).
`defaults_applied`	No	Optional parameters that were not supplied, so their documented defaults were used.
`formula_reference`	No	Mathematical formula or reference applied.

Schema Changelog

Changes observed during successful MCP inspections.

Changed1 schema field changedv2.1.1Oct 2, 2026

addedOutput schema / properties / defaults_applied

Added value: +{
+  "description": "Optional parameters that were not supplied, so their documented defaults were used.",
+  "items": {
+    "type": "string"
+  },
+  "type": "array"
+}

Changed1 schema field changedv2.0.1Oct 1, 2026
- changedInput schema / properties / useful_life / description
```
Previous value: -"Useful life in years n."New value: +"Useful life in years n (integer ≥ 1)."
```

Changed2 schema fields changedv0.1.4Sep 30, 2026

changedOutput schema / properties / steps / description

Previous value: -"Intermediate calculation steps for traceability."New value: +"Intermediate calculation steps for traceability (one string per step)."

removedOutput schema / properties / steps / items / type
```
Removed value: -"object"
```

First observedv0.1.0Sep 30, 2026

TDQS

A4.9/5.0

Behavior5/5

Does the description disclose side effects, auth requirements, rate limits, or destructive behavior?

Annotations already establish readOnly/idempotent/closed-world, but the description adds substantive behavior: it is pure arithmetic with no I/O or external calls, results are rounded to 2 decimals, non-selected method parameters are accepted and ignored, and an unknown method or missing required parameter returns an error instead of a value. That error semantics and ignore-behavior detail go well beyond the annotations.

Agents need to know what a tool does to the world before calling it. Descriptions should go beyond structured annotations to explain consequences.

Conciseness4/5

Is the description appropriately sized, front-loaded, and free of redundancy?

Front-loaded with purpose, then routing, then per-method inputs, and nearly every sentence carries load. However the asset-specific sibling list is stated twice (once as 'prefer the dedicated...' and again as 'for asset-specific income valuations use...'), which is avoidable repetition in an otherwise dense block.

Shorter descriptions cost fewer tokens and are easier for agents to parse. Every sentence should earn its place.

Completeness5/5

Given the tool's complexity, does the description cover enough for an agent to succeed on first attempt?

An output schema exists so return values need no prose, and the description still covers method enumeration, per-method required inputs, alignment constraints, unit conventions, ignored extra parameters, and error behavior. For a 14-parameter, 5-method dispatch tool, the agent has everything needed to call it correctly.

Complex tools with many parameters or behaviors need more documentation. Simple tools need less. This dimension scales expectations accordingly.

Parameters5/5

Does the description clarify parameter syntax, constraints, interactions, or defaults beyond what the schema provides?

Schema coverage is 100% (baseline 3), but the description adds per-method required-parameter recipes, cross-parameter constraints (cash_flow_projections and contributory_asset_charges must be period-aligned; cash_flows_with/without must be equal length), the decimal convention for rates, and the omit-unused-kwargs rule. This meaningfully exceeds what the schema alone conveys.

Input schemas describe structure but not intent. Descriptions should explain non-obvious parameter relationships and valid value ranges.

Purpose5/5

Does the description clearly state what the tool does and how it differs from similar tools?

Opens with a specific domain (income approach) and enumerates the exact methods (relief from royalty, MPEE, single-period excess earnings, incremental cash flow, CAC), stating that 'method selects the formula'. It explicitly distinguishes itself from the dedicated asset valuation siblings, so an agent can place it without opening a schema.

Agents choose between tools based on descriptions. A clear purpose with a specific verb and resource helps agents select the right tool.

Usage Guidelines5/5

Does the description explain when to use this tool, when not to, or what alternatives exist?

Gives explicit when-to-use routing: 'relief_from_royalty for IP with observable royalty rates', 'excess earnings for the residual intangible', and steers asset-specific work to valuation_customer/technology/ip/human_capital plus valuation_royalty_analysis, valuation_cost_approach and valuation_market_approach. Alternatives and their selecting conditions are named, not inferred.

Agents often have multiple tools that could apply. Explicit usage guidance like "use X instead of Y when Z" prevents misuse.

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