A Study On Evaluating Intrinsic Value Based On Econmic Value Added (EVA) Theory

The Chinese financial industry will open gradually after China joined the WTO, and the Chinese capital market also will be gradually maturing, the value based investment will occupy the predominant in the future. Right against such a theory background, this thesis probed into the method that evaluating company's intrinsic value. EVA evaluation model that this thesis main contents is an argument which is based on Economic Value Added (EVA) theories, also this thesis compare the EVA evaluation model with other evaluation model, and try to proof that model can be used as a kind of the new method of evaluation the intrinsic value. And research with a demonstration of Guangdong electronic power and Tongrentang, two listed companies. It was discovered after demonstration that the discounted dividend model and the discounted free cash flow model are all existing the weakness whose the future cash flow is difficult to estimate because of fluctuate of the cash flow. But the Economic Value Added (EVA) , because of only considering the cost of investment not the total investment, does not exist exquisite fluctuate, therefore it is very convenient to forecast the future EVA flow by statistic analysis.After researching and analyzing by this thesis, the writer consider that the EVA guideline has more strongpoint in evaluating the outstanding achievement of a corporation than other guideline. It is a scale of the true economic profit of a corporation. It is a tool to be used to evaluating the outstanding achievement of listed company. It's ideal accord with the core of modern financial administrant-maximize of the value of dormant partner.Since EVA supply us a efficiency estimate standard to estimate the value of corporation, and the price of the stock is based on the value of the corporation, It should be a important tool of invest value analysis to the investor. Especially in our capital market, since the short failure of our market efficiency, it should be an important tool of choosing the stock to a long term investor, at the same time that model also can apply in capital evaluation in company's mergers & acquisitions and recapitalization.