The Application Of Discounted Cash Flow Model In The Evaluation Of Enterprises

In the late of1980s, the introduction of asset valuation business, simultaneously, the assessmentof physical assets were introduced. The concept that enterprise value is equal to the value of allcorporate assets was brought in. With the development of evaluation method theory, the evaluationreport demanders were less satisfied with the method of physical assets. Based on the need of thisreality, there is a great theoretical value and practical significance to research the discounted cashflow model.Theoretically, this paper discusses the definition of corporate cash flow and its specific methodof calculation for the discounted cash flow method of valuation models. And at the same time, it alsodiscusses the discount rate theoretically. This article takes special attention to the dicount rate in theprocess of valuation, so in the Fuyao’s assessment, this paper adapted to empirical study. Theempirical study investigated Fuyao’s β coefficient of the influencing factors form2005-2012,during this time selecting32quarterly financial data of Fuyao’s finaicial data, GDP quarterly growthrate and quarterly data of exchange rate as multiple regression analysis. The result of the empiricalstduy shows that Fuyao’s β coefficients and exchange rates, GDP’s growth rates and financialleverage are negatively correlated.This article seeks to provide a rigorous analysis framework，takes into account each factor thatwould affect the value of the company, and finally assesses the value of a company. Throughestimating free cash flow of the company and testing theβcoefficient empirically, I believe in ourassessment practitioners we have been qualified to use this model to assess the value of theenterprise; With the further improvement of China’s capital market, the discounted cash flow modelwill become the mainstream method of business valuation.