Intangible Asset Valuation

Income Methods

valuation_income_methods

Read-onlyIdempotent

Compute income-approach intangible asset valuations with relief-from-royalty, excess earnings, incremental cash flow, and contributory asset charge methods.

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; other parameters are method-dependent, so supply those named for the selected method and omit the rest (documented defaults apply where defined). Pure arithmetic: no I/O and no external calls, and numeric results are returned rounded to 2 decimals. Parameters belonging to other methods of this tool are accepted and ignored. Supplying an unknown method, or leaving unset a parameter that the chosen method requires, 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.
`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).
`formula_reference`	No	Mathematical formula or reference applied.

Schema Changelog

Changes observed during successful MCP inspections.

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 cover readOnly/idempotent/non-open-world, but the description goes well beyond them: it discloses that the tool is pure arithmetic with no I/O or external calls, that results are rounded to 2 decimals, that off-method parameters are silently accepted and ignored, and that an unknown method or a missing required param yields an error rather than a value. These are exactly the behavioral facts an agent cannot infer from structured fields.

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?

Dense and front-loaded: purpose, then routing, then per-method parameter requirements, then behavior. Every sentence carries information, though the parameter-dependency walkthrough is long and somewhat list-like, making it heavier than the routing content that precedes it.

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 not be explained, and the description still notes the 2-decimal rounding. Combined with complete schema coverage, explicit method selection, parameter dependencies, alignment rules, and error behavior, an agent has everything needed to invoke it correctly for any of the five methods.

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%, so baseline is 3, but the description adds cross-parameter constraints the schema cannot express: which parameters each method requires, that method is the only universally required field, that others are method-dependent and should be omitted, and the alignment invariants ('period-aligned,' 'equal length'). This is genuine added semantic value over per-field descriptions.

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 five concrete formulas the tool computes, in a single clear verb+resource framing. It also explicitly distinguishes the family of sibling tools (valuation_cost_approach, valuation_market_approach, valuation_customer, etc.) so an agent can place it in the tool taxonomy without opening the 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?

Explicit routing rules: 'relief_from_royalty for IP with observable royalty rates,' 'excess earnings for the residual intangible,' and a full set of when-not/prefer alternatives ('prefer the dedicated valuation_customer, valuation_technology, valuation_ip and valuation_human_capital tools,' plus royalty and cost/market pointers). An agent can select this tool vs any sibling from the description alone.

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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