Corporation Valuation

After 3-year-long bear market in Chinese stock market, the investors, listed corporations and the market supervisors realize that it is important to know the true value of the corporation. This paper compares the EVA model with the Discounted Cash Flow model in order to give some advice for using these two models.The paper describes the procedure of using the Discounted Cash Flow model to evaluate a corporation and manage the value of a corporation. The paper also shows the method to calculate the EVA of a corporation and the ways of using the EVA model to manage the value of a corporation.The fourth chapter proves that when the two models use the same hypothesis the outcomes of the two models are the same. In the case that the EVA grows in a set rate, the value counted by the EVA model is higher than the Discounted Cash Flow model. When using the EVA model, the consideration of the R&D also increases the value of a corporation.The EVA model and the Discounted Cash Flow model provide the same way to raise the value of a corporation. Compared with the Discounted Cash Flow model, the EVA model can also be a criterion of the performance of the corporation managers.The fifth chapter uses both the EVA model and the Discounted Cash Flow model to evaluate Lizhu Corporation and Yuedianli Corporation. Lizhu Corporation has a large amount of R&D expense. The value of Lizhu Corporation counted by the EVA model is higher than the Discounted Cash Flow model. Yuedianli Corporation has little R&D expense. The value of Yuedianli Corporation counted by the EVA model is just the same as the Discounted Cash Flow model. That accords with the conclusions of the fourth chapter.