A Comparative Study Of The Overall Asset Valuation Method For Determining The Discount Rate

Overall asset evaluation method has a wide application in cooperation between enterprises, mergers and acquisitions, joint-stock enterprise reform, asset-backed or guarantees, asset loss claims, bankruptcy and liquidation. When using the income approach in the evaluation of the assets of the enterprise as a whole, the determination of the discount rate is crucial, because a little fluctuations of the discount rate can bring great changes in the final asset valuesDifferent methods for determining the discount rate have different calculation procedures, also have different applicable conditions and data technology requirements, how to properly select the method for determining the discount rate which match their own different conditions and different purpose is a important problem. This article mainly analyzes the method for determining the discount rate from aspects of different characteristics, applicable principles, applications, etc. Through comparison of different methods, we find out some of the principles and processes companies should follow for determining the proper discount rate. And this article provides guidance for the overall asset evaluation of enterprise.First, we analyses the relevant research literature from the nature and the features of the discount rate, the principles of deterring the discount rate and factors influencing the discount rate to figure out a variety of attributes and methods of determining the discount rate; Secondly, we compare the principle and technology of computing of Weighted Average Cost of Capital, Capital Asset Pricing Model, the industry average income rate model and cumulative method; Third, from the perspective of different evaluators and their purpose, ownership, we give a further comparison of the current primary method for determining the discount rate to provides a comparative idea for companies to choose their own proper discount rate; Fourth, making XYZ’s relevant background information and securities available data as a starting point, we give a specific analysis of the process of determining the discount rate for the XYZ company’s overall asset evaluation and ultimately identify a suitable discount rate.This analysis plays a guiding role in the process of the selection method and determining the discount rate.