The Enterprise Appraisal Under The Parameters Uncertainty

With the establishment of modern enterprise system and the constant development of market economy, the goal of modern enterprise financial management has already changed from pursuing utmost profit to utmost enterprise value, what's more, the trade of property right such as merger and acquisition, enterprise reshuffles, equity trade is more and more, which makes the enterprise appraisal to be the operators'and correlative interest groups'attention matter.At present, the free cash flow discount approach, which is deemed to the most right approach in theory, is the most used enterprise appraisal approach. The parameters data of the free cash flow discount model is acquired by forecasting the enterprise operation and finance in the future. The influence of the subjective forecast and market condition make the parameters uncertainty essentially, however, the deficiency is that the uncertainty has not been considered fully when the model is used traditionally.To solve the deficiency as well as to make the appraisal result more accurate, the paper will introduce the parameters uncertainty to the enterprise appraisal and measure the change of appraisal result after considering the uncertainty. With the advancement of computer technology, it can measure the uncertainty in the model easily. Monte Carlo Simulation is the structure approach that can introduce the parameters uncertainty to the model, furthermore, it can analysis and explain the uncertainty.Based on the idea, the paper discusses the enterprise appraisal approach firstly, after comparative analysis, it educes the advantage of the free cash flow discount, then it points out the deficiency that the uncertainty has not been considered fully when the model is used traditionally, next it analyzes the uncertainty of parameters that in the free cash flow discount model, what's more, analyzes how to describe the uncertainty parameters and to calculate the enterprise value using Monte Carlo Simulation, at last, it demonstrates the calculation process by an illustration. We can find that the appraisal process and result are different between the traditional calculation approach and considering the uncertainty of parameters then using Monte Carlo Simulation by the illustration.