Eva In Business Valuation Study

With the rapid growth of China's capital market, property rights trading activities such as corporate mergers, restructuring, stock trading and risk investment, have flourished, and the corporate valuation activity is one of the core issues to determine whether property rights transactions can achieve or not. With the increasingly advocate of maximizing shareholder value today, enterprise's value evaluation model based on the traditional profit index showed obvious shortcomings. So EVA evaluation model based on EVA index came into being. EVA was first founded by Stern Stewart Consultation Company of the United States in 80's in 20 centuries. The biggest advantage of EVA is that in evaluation the management accomplishment of companies, it not only deducts the obligation capital cost, but also to deduct the rights capital cost. EVA evaluation Model derives from EVA index and traditional model, it evaluates enterprise's value from the shareholder's angle.This paper researches topics related with establishing and application of the EVA evaluation Model by methods of theories research and the substantial evidence researches, and studies how to apply EVA valuation model to find the growth type enterprise from the Chinese stock market in order to help investors make the right decision. This paper is generally divided into two sections; the first section contains theory which is combined with four chapters. Chapter 1 introduces the background of the topics,first it introduces the conception of EVA by pointing out the shortcomings of the traditional profit indices, then it tells the reason why we introduce EVA and the significance of EVA, finally, it summarizes the domestic and foreign status of EVA research, so that the reader can have basic understanding to EVA. Chapter 2 provides more details about computing principle and items to adjust then brings forward the advantage of EVA by comparing EVA and traditional accounting profit indices. Since EVA can not be used to assess the value of enterprises directly, chapter 4 of the paper presents the deducing process from EVA to EVA valuation model. The focus of this paper is the second section - Factor Analysis, including Chapter 3 and 5. Chapter 3 first picks out 100 enterprises from China in 2002 as the study sample, it observes incremental informational content based on EVA index imported and the degree that the traditional profit indicators reflect the company's value. The results turn out that: traditional profit indices still have useful information, EVA index can not replace the accounting profit indices entirely, but it is obvious that EVA has additional information than traditional profit indices. Based on EVA characteristics, Chapter 6 introduces detailed steps to assess enterprise value through EVA valuation model. It calculates enterprise value by steps through fundamental analysis, forecasting future EVA and determining the discount rate. This paper mainly refers to Baosteel when calculating EVA.In this paper, the innovation lies in the fact that it compares traditional profit indices and EVA through incremental information method. It then proves that EVA index is effective. This paper also presents steps to access enterprise value through EVA model and demonstrates it in Baosteel as an example. This paper hopes to provide a new idea for investors to select high-quality companies through discussing EVA valuation model.