Enterprise Valuation Method Is A Comparative Study

This paper mainly focus on three main enterprise valuation methods, including Discounted Cash Flow method, Relative Valuation method and Option Valuation method. It analyzed deeply their comparative strongpoint, shortcoming and applicability. For many parameters not being obtained, Option Valuation method is still in theory exploring steps. There are many differences from the viewpoints of valuation basis,risk measurement and valuation,comparing Discounted Cash Flow method with Relative Valuation method. Discounted Cash Flow method is becoming the mainly valuation method because it can valuate the enterprise more directly and accurately. Even more importantly, it is easy to be observed.Moreover, this paper compared four different kinds of models under Discounted Cash Flow method from each other. Dividend Discounted model is fit for the firm whose dividend policy is good and stabilized, especially in non-cyclical industries. Because the mass firm cannot distribute all of free cash flow to equity as dividends, Free Cash Flow to Equity model is more suitable in enterprise valuation than Dividend Discounted. In cyclical industries, such as real estate development, Free Cash Flow to Firm model is more suitable than FCFE model because the firm's liability vary heavily by the effect of macro-economic. Economic Value Added model (EVA) is almost as same as FCFF model. It adopts the concept of economic profit and reflects the economic reality more exactly.Eventually, this paper takes BEIJING TIANHONG BAOYE REAL ESTATE CO., LTD for instance. On the basis of the reasonable forecast, the company is evaluated using the four discounted cash flow model and relative valuation methods, P/E and M/B. The results testify the above analyze conclusion.