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The Study Of The Evaluation Models Of Enterprise Value On The Basis Of Dynamic Cash Flow

Posted on:2003-09-10Degree:DoctorType:Dissertation
Country:ChinaCandidate:Y X LiFull Text:PDF
GTID:1116360092980356Subject:Technical Economics and Management
Abstract/Summary:PDF Full Text Request
This paper studies and examines the evaluation models of enterprise value on the basis of dynamic cash flow as far as the bottleneck problems existing at both home and abroad concerned: the definition of cash flow, the estimation and forecast of cash flow, the meaning of discount rate, the calculation of the discount rate and the identification of the evaluating period.The enterprise value reflects the overall profitability of the firm and the ultimate target of the financial management is the maximization of the enterprise value. Therefore, cash flow, as the basic of the evaluation, should be the overall cash flow occurring in all the enterprise business activities instead of the operating cash flow, free cash flow, equity cash flow or debt cash flow.At present there are many estimating models, including Time-series model, Stochastic series model, Fuzzy estimating model, Multi-variable regression model, Gray model and hierarchy analysis model, and they are some help to estimating the overall cash flow. Due to the existing volatility, stochastic and dynamic properties of cash flow, this paper employs Exponential smoothing method and Moving average method to eliminate the effects of the stochastic factors, use the seasonal exponent to eliminate the seasonal volatility of the cash flow, the exponent curve and polynomial fitting curve to estimate the overall cash flow and also provides the calculating methods and identifying principle of the overall cash flow.Discount rate is an important parameter to influence the enterprise value evaluation. It should respond to the effects from the firm risks, safe returns, inflation and the changes of the interest rate. The generally accepted standard about the definition and identification of the discount rate has not come into being and so it is likely to be influenced by many subjective factors. This paper argues that the discount rate is the cost created by using the fund and the cost of the enterprise overall cash flow including the time value of money, inflation retrieval, risk retrieval, the retrieval of the ability to cash in, the retrieval of breaking the contract and the expiration retrieval. Furthermore, itis the composite fund cost incurred by all the fund resources, the weighted average value of the cost of debts and the cost of the equities, and represents the overall discount rate of the enterprise. Allowing for the effects of the adjustment of tax factor, the change of the capital structure, the liquidity risk and the dynamic variation of fund, the discount rate is calculated on the basis of the WACC model and is finally fixed.According to the theory of life cycle, the enterprise has his life span and it is limited. Therefore, we can not use the perpetual method or the segmenting method to evaluate the enterprise value and we must reasonably estimate the enterprise' s life and surviving period. This paper examines some methods, such as contrasting the cash flow indexes with the cash stock indexes within the same industry and contrasting among the segments to decide the assessing period, and using the polynomial model and maximum principle to inversely deduce the enterprise life span, and argues that these methods are significant for reasonably and scientifically identifying the evaluating period.To those enterprises whose cash flows are continually negative, the cash flow discount model will fail to evaluate the enterprise value. Therefore, to those enterprises that have negative cash flows but still have potential value, the paper suggests to use Black-Scholes Option Pricing Model and EVA Model to assess them in order to remedy the defects of cash flow discount model.Due to the globally spreading crisis of honesty and credit, the financial information distortion has brought impacts to the traditional evaluation of enterprise value. Furthermore, selecting the indexes from the common financial data makes us to walk in the detour and the indexes, created from the system of rights and responsibilities, have already revealed the passivation.
Keywords/Search Tags:enterprise value, evaluation, Overall cash flow, discount rate, evaluating period, dynamic
PDF Full Text Request
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