EXPERTS IN MEDICAL EQUIPMENT
Specializing inAppraisals
Research
Equipment Planning

APPRAISALS • RESEARCH • EQUIPMENT PLANNING

About Edward G. Detwiler & Associates
With over 45 years of experience, Edward G. Detwiler & Associates, Ltd. specializes in appraising
medical, scientific and other high technology equipment. The company’s expertise allows it to perform
a wide variety of assignments, including projects as small as a single asset or physician practice and aslarge as entire hospitals and public company mergers. These appraisals are done for many reasons, suchas transfers of ownership, mergers, acquisitions, divorces, bankruptcies, lease buyouts and financing.
In addition to delivering expert, impartial medical equipment valuations, the company also provides:• A highly skilled research team• Market and product forecasting reports• Customized research reports for any modality• Appraisal review services• Hospital equipment planning and design• Inventory valuations

Appraisals
Our appraisals can be used to value single products, medical facilities or practices of all sizes, imaging
or surgery centers, laboratories or entire hospitals. They are also used in financing of new products,
including equipment of all types that may be found in a healthcare or research facility. While most of
our work involves the valuation of medical and scientific equipment, we also provide services in otherhigh technology and complex projects.

Research
Our research takes into consideration prior sales of like assets of like age and condition. This works
quite well for products that have an established market. Values are obtained from various sources in theindustry, including used equipment dealers and brokers and the original manufacturers and distributors.
In addition to current market studies, we perform research for forecasting of values into the future, basedon trends in medical and scientific research. We look for information regarding future developmentsthat can help in estimating the useful life of products for technological obsolescence and planning of
new replacement equipment for existing or new facilities.

Why(Japanese market expansion and their needs)

Leasing and Financing
Appraisals for leasing options and evaluations.
***Insert or modify information for the Japanese healthcare market

Leasing: Types, Benefits, and End-of-Lease Options
Equipment acquisitions can be one of the largest expenses an organization faces. Leasing is a way for abusiness to obtain the use of new, timesaving, productive equipment with no capital investment, making
it an integral part of a company's capital or operating budgeting process, and a way to fund equipment
acquisitions. Currently, companies are placing a higher value on their working capital and the need for
liquidity. Leasing provides a solution that enables businesses to fulfill their equipment needs, especiallyin high technology applications, without depleting their capital reserves.
Main reasons why companies lease:• Cash flow and finances - Leasing permits a close matching of rental payments to the revenue
produced by using the equipment. Since payments are spread affordably over time, leasing
reserves capital and keeps debt lines open.
• Flexibility - As business needs change, it is often possible to add to or upgrade the lease at any
point through changes allowed in most master leases. If growth is anticipated, it is important tonegotiate that option when structuring the lease.
• Upgraded technology - If an industry demands the latest technology by nature, a short-term
operating lease can help obtain the latest technology equipment and conserve cash. Leasing also
reduces the risk of ending up with obsolete equipment, since upgrades can be performed or
equipment added according to the needs of the business.
• Customized solutions - A variety of leasing products are available, allowing a customized
program that addresses key business issues such as cash flow, budgeting, transaction structureand seasonality.
• Tax advantages - Lease payments can be deducted from corporate income, since the operatinglease is not considered a purchase, but a tax-deductible operating expense.
A fair market value lease is considered an operating lease for which periodic payments are fully taxdeductible. It is the preferred option for those concerned about technological obsolescence. Also calleda true lease, a fair market value lease is a lease for federal income tax purposes whereby the tax
incentives, including depreciation, are retained by the lessor and forwarded to the lessee in the form oflower lease payments. Thus, this option tends to yield the lowest monthly payment. At the end of thelease there is the option to purchase the equipment at the then fair market value. Other alternatives are
upgrading to new equipment, extending the lease term and returning the equipment.
The $1 purchase option lease is considered a finance lease and is treated as a loan for federal income tax
purposes. This lease structure is favored by customers who want to own the equipment at the end of thelease and have a desire to depreciate the investment. The $1 purchase option lease contains the benefitsof ownership, but tends to yield the highest monthly payments. At the end of the lease term thecustomer has the option to purchase the equipment for $1.

The 10% purchase option lease is also considered a finance lease. It is a good alternative for those who
are uncertain what their needs will be in the future and want a fixed purchase price at the end of thelease. With this lease structure, the monthly payment will be lower than a $1 purchase option lease, buthigher than a fair market value lease. At the end of the lease term the lessee may choose to purchase theequipment for 10% of the original cost, upgrade to new equipment or return the equipment.

Acquisitions
In today’s market, many small practices are feeling squeezed to keep up with all the demands of patientcare, reimbursements and regulations. A small practice that is unable to offer the variety of medical
services available through a hospital system or large physician group may begin to realize that it is at a
disadvantage. There are better reimbursements and incentives when a physician is affiliated with alarger group or organization due to more patient volume and better quality care.
***(Include information about the Japanese market on acquisitions and mergers)

Standards and Ethics (ISO 55000)(include Japanese standards and their future standards)• Include any supporting information from professor in Kyoto or Noberto

Process of Appraisal
The process that we follow in most of our valuation cases begins with a site inspection, as it is necessary
for us to inventory the assets of the practice or facility. During that visit we also review any pertinent
documents and interview key personnel to complete our analysis. Following that inspection, we proceedwith a research study into the value of the medical, scientific, information technology and officeequipment. We then provide a complete and comprehensive appraisal report approximately two weeks
following our inspection.

DEFINITIONS OF VALUE:
FAIR MARKET VALUE IN PLACE AND IN USE (FMV)The definition of this value is the amount expressed in money, as of the appraisal date, that may be
expected to exchange between a willing buyer and a willing seller with equity to both, neither
under any compulsion to buy or sell, and both fully aware of all relevant facts. Further, the valueof each item includes installation and the contribution of the item to the operating facility. Thisvalue presupposes the continued utilization of the item in conjunction with all other installed
items.
ORDERLY LIQUIDATION VALUE (OLV)

The amount of gross proceeds which could be expected from the sale of the appraised assets, held
under orderly sale conditions, given a reasonable period of time in which to find a purchaser,considering a completed sale of all assets, "as is and where is," with the buyer assuming all costs ofremoval, with all sales made free and clear of all liens and encumbrances, with the seller acting
under compulsion. This value is frequently referred to as the "wholesale value”. This is theestimated dollar amount that could be received if the equipment were to be sold on the usedequipment market to be moved, resold and reinstalled in another location. This value is based
primarily on the condition of the market and the popularity of the product, the manufacturer andthe procedures performed by the product. Age, condition and other factors of obsolescence also
enter into the valuation process as with the fair market value appraisal.
FORCED LIQUIDATION VALUE (FLV)

Defined as the estimated amount of the most probable price expressed in terms of currency in U.S.
dollars which the subject equipment or inventory inspected could typically be realized at aproperly advertised and conducted public auction sale, held under forced sale conditions (no morethan 90 days), with the seller obligated to sell, and under present day economic trends, as of theeffective date of the appraisal report. Conclusions take into consideration physical location,difficulty of removal, physical condition, adaptability, specialization, marketability, overall
appearance and psychological appeal. All assets are to be sold “as is” with purchasers responsible
for removal of the assets at their own risk and expense.
APPROACHES TO VALUE

Three approaches are used to determine the value of assets to be appraised; the "market" approach, the"cost" approach and the "income" approach. These approaches are used separately or in combinations
that make the most sense for the particular product being valued. Explanations of these approaches andtheir applications follow:
The "market" approach takes into consideration prior sales of similar assets of like age and condition.
This works quite well for products that have an established market. Values are obtained from various
sources in the industry, including used equipment dealers and brokers and the original manufacturers
and distributors.

The "cost" approach considers the current replacement cost of a new item of identical utility (or as close
as possible) to that being valued. Then various subtractions are made from this value to reflect suchitems as wear and tear, age, and technological obsolescence. Replacement cost becomes the upper limitof value, regardless of the original cost of acquisition of the subject asset. The cost approach is often
used as a test of the reasonableness of the other approaches.

Cost Approach Formula:
𝐹𝐹𝐹𝐹𝐹𝐹 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 = �

𝑅𝑅𝑅𝑅𝑅𝑅 − 𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊 − 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂∗ 𝑅𝑅𝑅𝑅𝑅𝑅� + 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂
𝐸𝐸𝐸𝐸𝐸𝐸𝑅𝑅𝑅𝑅𝑅𝑅is Replacement Cost, New,
𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊 is Expired Warranty, in this example, 7% for a one-year warranty,
𝐸𝐸𝐸𝐸𝐸𝐸 is the Estimated Useful Life of the Equipment,
𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 is the Orderly Liquidation Value at Projected Termination of EUL,𝑅𝑅𝑅𝑅𝑅𝑅 is the Remaining Useful Life of the Equipment at time of Valuation.
Example of Cost Approach:

RCN ($)$472,100

WARR
(%)
7%

WARR
($)
$33,047$4,700,000

7%$329,000$2,133,750

7%$149,363

OLV
(%)
15%

0%

OLV ($)$70,815

EUL
(Yr)
10

$-

8

$-

8

Age
RUL
(Yr)
(Yr)
2
8
Percent of RCN:

FMV

2

6

FMV*
Adjusted$285,000
60%

FMVR

OLV

FLV

$365,405
77%

FMV
Rounded$365,00077%$180,000
38%$120,00025%$75,000
16%$3,278,250$3,278,000$3,000,000$1,500,000$500,000$350,000

Percent of RCN:

70%

70%

64%

32%

11%

7%

2
6
Percent of RCN:

$1,488,291
70%$1,488,000
70%$1,300,000
61%$800,000
37%$150,000
7%$100,000
5%FMV Adjusted* is the value adjusted to that which a reasonable buyer would pay for similar usedproducts, regardless of age and condition, typically not more than 65% of RCN
The "income" approach adds economic reality to the value of assets when they can be identified as aseparate, income-producing business entity. If the income of the business or group of assets is greaterthan the expense of maintaining operations, then the valuation of the assets can be determined by themarket or cost approach. If not, then an economic penalty must be assigned to the assets that reflects thecondition of the business. The value may, in certain circumstances, be limited to the orderly liquidation
value, even though the concept called for is the fair market value. The income approach will not be usedin most engagements, except as it supports our assignment of Fair Market Value.
Our research takes into consideration prior sales of like assets of like age and condition. This works
quite well for products that have an established market. Values are obtained from various sources in theindustry, including used equipment dealers and brokers and the original manufacturers and distributors.
Due to our extensive database of past appraisals of equipment, we rely heavily on that database inassigning or testing values.
REPORT FORMAT
Formatting of reports is done in a way that allows the reader to follow the inspector’s path through thefacility to identify the items appraised by description, including location, noun designation,manufacturer, model number, serial number, quantity, condition and assigned value. While the report
can be tailored to the needs of the client, we generally use the format found on the following pages.
They are also tailored to the type of assets being appraised and the needs of various types of assets andreasons for appraisal.

The following spreadsheet is from an actual redacted report for a Fair Market Value Lease Buy-Out at the end of a 60 monthlease:
Description

Original Cost

Fair Market Value

Philips Allura Xper FD20 Cardiovascular System, Including:Workstation, 9696 002 04711 Dell 690RT, Service Tag CVKxxxx
Gantry C-Arm 9896 002 06463 GEO TILT, Serial Number 2xxx
Image System 9696 002 06473 GEO IMAGE V, Serial Number 3xxx
Injector, Mark V ProVis, Medrad PPD, Serial Number 10xxxx$ 1,200,000.00$ 285,000.00

Zonare Z.One Ultra Convertible Ultrasound System, Serial Number 03027Bxxxx,
Transducer, curved array, C6-2, Serial Number 01261C6Xxxxx
Transducer, L8-3, Serial Number 01675L5Xxxxx
Printer, thermal, Sony
Cart, Z.One SmartCart, with battery pack$$

Grand Total Values:*Fair Market Value is based on the value at the end of a 60 mo. Lease

48,926.16$ 1,248,926.16

18,000.00$ 303,000.00

Equipment Planning***(Include information about the Japanese market on equipment planning for new/replacement
facilities)
Process of equipment planning:•

Phase I – Programming and Budgeting, includingo Technology Assessment with Transition Planningo Future Technology Budget and Acquisition Plan Development•

Phase II – Design•

Phase III – Construction Support•

Phase IV – Medical Equipment Procurement•

Phase V – Procurement Assistance•Phase VI – Medical Equipment Installation Coordination

ABOUT US
E D DETWILER , ASA: PRESIDENT OF EDWARD G. DETWILER & ASSOCIATES, LTD., ED HAS
OVER 45 YEARS OF EXPERIENCE IN THE MEDICAL & SCIENTIFIC EQUIPMENT FIELD AND IS A
MEMBER OF THE FOLLOWING GROUPS: ACCREDITED SENIOR APPRAISER WITH THE
AMERICAN SOCIETY OF APPRAISERS (ASA), BOARD MEMBER ON THE ASA HEALTH CARE
SPECIAL INTEREST GROUP, COMMERCIAL PANEL MEMBER OF THE AMERICAN ARBITRATIONASSOCIATION, AND ASSOCIATE WITH AMERICAN BAR ASSOCIATION.

J AIME DOLEWSKI : AN ASSOCIATE APPRAISER AT EDWARD G. DETWILER & ASSOCIATES,
LTD,. JAIME HAS BEEN WITH THE COMPANY FOR 5 YEARS. CURRENTLY A CANDIDATEMEMBER WITH AMERICAN SOCIETY OF APPRAISERS, SHE IS SEEKING THE AM (ACCREDITEDMEMBER) DESIGNATION.

C H RIS C ALANDRA: ADMINISTRATIVE AND RESEARCH ASSISTANT AT EDWARD G. DETWILER& ASSOCIATES, LTD. CHRIS HAS BEEN WITH THE COMPANY FOR 7 YEARS. SHE LEADS THE
RESEARCH FORECAST REPORT ACTIVITY AND SPENDS MUCH OF HER TIME WRITING THESE
VERY DETAILED REPORTS.

N AO N ISHIO: RESEARCH ASSISTANT, NEW TO EDWARD G. DETWILER & ASSOCIATES, LTD.
ORIGINALLY FROM JAPAN, NAO IS A RECENT GRADUATE OF THE UNIVERSITY OF ILLINOIS,WITH A BACHELOR OF SCIENCE DEGREE IN CIVIL ENGINEERING. SHE BRINGS SKILLS NEEDEDIN RESEARCH AND IN EQUIPMENT DESIGN FOR NEW AND REPLACEMENT FACILITIES.
F OR MORE INFORMATION VISIT US AT : WWW. EGDETWILER . COM

Edward G. Detwiler, ASA
President
egd@egdetwiler.com
1580 North Northwest Highway, Suite 212
Park Ridge, IL 60068-1462
1 (800) 995-9003
01 (847) 202-9900

www.egdetwiler.com