Free Cash Flow And Enterprise Value Assessment

Nowadays, with the setup of market economy and the process of reform and opening-up policy, the amount and scale of acquisition are growing at a high speed. During the process of acquisition, all parties will concern the value of target company, which should be evaluated scientifically and reasonably. China Appraisal Society requests the serviceability of Asset-based Approach, Market-based Approach and Income Approach should be studied in practice and all these methods should be applied comprehensively.According to this request, this thesis is to study the theory and ways of business valuation, especially the Discounted Free Cash Flow Model. Firstly, it classifies the concept and calculation of free cash flow, and then applies the Discounted Free Cash Flow Model to the business valuation of a listed company by predicting its amount of free cash flow, discount rate and residual value. Based on analyses of the domestic researchers and the testified results, this thesis makes a conclusion that the Discounted Free Cash Flow Method can be applied in China. Finally, this thesis analyzes advantages and disadvantages of the Discounted Free Cash Flow Model, and points out that with the development and reform of capital market, the model will play an important role in business valuation. This thesis uses the Normative Approach overall, and the data and statistic analysis in Part Three. All the financial information comes form the website http://www.hdgt.com.cn/,and indexes of stock and market are obtained from the software of DaZhiHui.