Researching Of Project Loan Evaluation Of ICBC Based On Free Cash Flow

Presently, Several banks , including ICBC Dalian Branch, CCB Dalian branch, ABC Dalian branch and so on, apply the project evaluation method to estimate the possibility of the project investment in the process of making the project loan decision. As a general business organization of the finance industry ,the ability of repaying the loan, the direct economic benefits and the underlying risk of the planned investment project become the three key factors in the project loan decision. And just for the case, the cash flow of the project is the direct manisfestation of the expectation repay ability and one of the most important factor which have effect on the economic benefits. So the cash flow appraisal become the important contents in the project evaluation process naturally. The scientific, objective and dependable cash flow appraisal become the the key factor for making right project loan decisions. The researching of the cash flow appraisal method has important realistic sense.Firstly the author of this thesis analysis the mian problem existed in the project evaluation process of the ICBC Dalian branch from the general theory of cash flow appraisal and the concrete practice in the project evaluation for the aim of making loan decisions. The main problem is that the capital investment and the operation capital investment , the other liabilities' repaying, the dividends paying of the stockers are omitted from the cash flow, in addition,including the seletion method of the cash flow discount rate. Then ,the author make further analysis for the reason of above-mentioned problem in the former section. In the end, the author put forward the improved cash flow appraisal method based on the free cash flow and the improved cash flow discount rate seletion method.After making analysis for the main problem in the tradition cash flow appraisal method and then put forward the improved method, in order to explain the improved method clearly and at the time analysis the effects on the decision making , the author quote a concrete case in the ICBC project loan evaluation practice. Firstly ,the author evaluate the project using the traditional and improved cash flow appraisal method respectively. And then, make an comparaison for the two results using different appraisal method, and an the same time, compare the results with the related decision standard of ICBC Dalian branch to analysis the effects on the project loan decision making. In the end the author gets the conclusion:It's the free cash flow and not the cash flow of business operation that form funds resource for repaying the project loan, we must consider the funds needed for the capital investment andthe operation capital investment. And at the same time ,we should match the risk and benefits in the process of selection suit dicount rate for cash flow discount, select different dicount rate for different project with different nature. In the end of this thesis, the author mentioned the deficits in the article and the item for further researching in the furture.