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Research Of Assessment On Corporation Valuation By Free Cash Flow

Posted on:2008-10-25Degree:MasterType:Thesis
Country:ChinaCandidate:D C GaoFull Text:PDF
GTID:2189360215453163Subject:Business Administration
Abstract/Summary:PDF Full Text Request
The value appraisal is important research contents in the domain of finance, investment, finance, and so on. No matter the financial property or real asset all has the value. Management behavior objects of business management, negotiable securities investment, industry investment and so on, are diversified property. The key of successful management and investment of these properties lies in understanding the value composition of these properties, grasping the measure of value of these properties. Therefore, it is extreme important to carry on the corporate value. The theory and the model of value appraisal also therefore arise at the historic moment. At present, the theoretical model of value appraisal passed through the long-term research and development, has become a whole embodiment of theory, and has been used in the practice widely.Based on narrating and commenting the theory of value appraisal, this article mainly through the analysis in the corporate finance report form forecast and calculate the future free cash flows, using the model of weighting cost of capital, calculate the weighting cost of capital, and obtaining the corporate value to the future free cash flows commutation. At the same time, after analyzing Heng Feng Group's management strategy, the article uses the method of corporate value appraisal of free cash flows to evaluate the corporate value of Heng Feng Group.This article is divided into 4 chapters, the concrete content is as follows:First chapter is the foreword. This chapter mainly elaborate significance of the corporate value appraisal, and determine the paper structure and the arrangement, as well as the origin of paper material data.Second chapter is the overall narration of the theory of corporate's value evaluation. This chapter is about the concrete elaboration of the historical development situation the corporate value, and summarize the common methods which are used in the corporate value evaluation.Third chapter is the theoretical analysis of the free cash flows. Summarizing the historical evolution of the free cash flows, analyzing the connotation of free cash flows, and contrasting with the profit target evaluation corporate value, analyzing how to use the financial report form to compute the method of free cash flows. Finally, inducing the concrete step of using free cash flows to carry on corporate value evaluation.The fourth chapter carries on the concrete value evaluation by using free cash flows law for the Heng Feng Group. Through case analysis, proving the scientific nature and usability of the theory of corporate value evaluation. The thought fountainhead of corporate value theory may trace the capital value theory which Irving Fisher proposed to the beginning of the 20th century.In the book of "Capital And Income Essence" which was published in 1906, Fisher analyzed the forming process of the capital value from sensation level and accountant measure. Summarizing the corporate value growth dependents on three factors: One is the future cash flows size; Two is the endurance of the future cash flows; Three is the risk level of future cash flows. Next, Modigliani and Miller (hereafter refers to as MM) proposed the famous MM theorem. Namely in does not consider the business entity income tax and in the transaction cost situation, if the capital market is at the full competition condition, the capital market arbitrage is completely free, in the market substitutes the opportunities for investment returns ratio and the personal financing cost is same, the corporate stock market value cannot be different because of the financing way. The MM theory founded the beginning of a matter of the exploration corporate capital structure and the corporate value relations. Later, take the MM theory as the foundation, the corporate value theory develops unceasingly.The value appraisal is forecast becomes to the property value, the estimate process of corporate partial or the overall value, is one kind the value judgment which makes to the sign. The value appraisal is one of market economy basic behaviors, has characteristic of justice, the fairness, openness. The main the method of corporate value appraisal has four kinds, namely relative value law, commutation cash flows law, economical profit law, option fixed price law.We analyze the theory of the value appraisal in general. Now, introducing one new value appraisal method, namely free cash flows law. The free cash flows is the surplus cash flows after corporate satisfies invests again needs, is the corporate shareholder's maximum present amount which under the premise that it does not affect the company to develop continually. The free cash flows main connotation originates for the company capital mainly has two parts: One is the stockholder's rights investor to corporate's investment is the rights and interests capital; Two is the company the long short-term loan and the bond which borrows into to the financial organ is the debt capital. They produce in the management in the corporate all available in the purchase material equipment or the payment wages. Therefore the company produces the cash flows after keeps in stock, properties and so on workshop equipment in the deduction must invest and the payment tax money, the remaining sum should belong to the shareholder and the creditor. This part of remaining sum is the free cash flows. Using Copeland's theoretical model: Free cash flows = stockholder's plus free cash flows creditor's plus free cash flows. Through the subject adjusts to accountant: the free cash flows = (NAPAT+ non-cash disbursement) - (capital outlay+ NOWC).The free cash flows function besides is one of the most important links in the company value appraisal system, it manages the achievement and in the investment value performance in the weight company avoids net profit, market profit, financial norms and so on, management cash net current quantity has been able the possibility which operated. Calculates the corporate value through the weighted average cost of capital model.We through the corporate value and the free cash flows theoretical analysis, below qualitative and the quota two aspects will carry on the analysis through the Mudanjiang Heng Feng Paper Industry Group, will analyze its corporate value. First, through to the papermaking profession macroscopic situation, the papermaking industry situation analysis, as well as carries on the strategic analysis to the permanent abundant group using the SWOT strategy analysis method, the accurate assurance permanent abundant group locates the environment and the position. Second, after uses in 2001-2006 year Heng Feng Group finance annual report the property debt table and the profit instrument figures out the tax only to do business the profit, the working capital only increases, targets and so on capital outlay, and 2007 - 2013 the financial annual report carries on the forecast to the permanent abundant group, after will calculate the future tax only to do business the profit, the working capital only increases, targets and so on capital outlay. Through formula: free cash flows =(NAPAT+ non-cash disbursement) - (capital outlay+ NOWC), will calculate the future free cash flows. Again uses the weighted average cost of capital formula r = K_d×ωd+K_e×(1 -ω_d), calculates the weighted average cost of capital. Carries on the commutation using the weighted average cost of capital to the free cash flows, calculates the permanent abundant group corporate value.Then through using the corporate value appraised the model carries on the computation, calculated the permanent abundant group's corporate value. And carries on the comparison with the current Shanghai quotation, obtains the permanent abundant group stock market to have the rise space conclusion. Finally, through the analysis of corporate value situation, proposes of the concrete countermeasure of corporate in resources disposition aspect, exterior resources use aspect, organizational structure aspect and financial aspect and so on, guarantees the Heng Feng Group corporate value guarantees price will increase unceasingly.
Keywords/Search Tags:corporate valuation, free cash flows, value appraisal, weighted average cost of capital
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