Applied Research To Assess The Value Of The Real Estate Company

In enterprise value assessment, value generally refers to the overall value of the enterprise, which means the assessment is conducted with the combination of the stock equity and creditors’ rights while considering the enterprise as a whole.The combination is not a simple sum of the two parties, but prediction based on company’s overall financial conditions, according to such financial accounting steps as assets, liabilities, financial.Relatively mature assessment methods nowadays are income approach, market approach and cost approach, each fitting different enterprises;researchers choose the proper approach according to the conditions of target of evaluation.Currently, real estate industry plays an important role in China’s economic development. It has key effect on both GDP and people’s living quality. This paper selected discounted cash flow model to appraise real estate enterprises after comparing different research methods.Cash flow is the lifeblood of the real estate business.The cash flow of the enterprises, especially the substantial cash flow, is part of the cash flow that still can be given to shareholders and creditors after guaranteeing normal operation of enterprises, which is an important manifestation of financial liquidity.Discount rate is one of the core parameters in value assessment, the selection method of which have decisive effect on the outcome of assessment. Therefore, selecting an objective and precise discount rate is a job of great significance.This paper chose the discount rate by weighted average cost of capital (WACC), and the cost of free capital was calculated by capital asset pricing model (CAPM).The real estate industry in China is known for high profit rate and high yield rate.On the basis of national restrictions on housing price, and the emergence of the real estate bubble in first-tier cities clues, the beta value is determined after fully considering the industry risk. Thus,the discount rate which suits the situation of China’s real estate industry is obtained.This paper does the analysis of enterprise value, taking Lushang Zhiye Corporation as an example.The forecast period financial statements are obtained through base period financial statements and then the substantial cash flow of forecast period is calculated.And the substantial cash flow is obtained by using the discounted cash flow model.The same methods are applied to calculate the substantial value from2010to2013based on historical data. Finally, the conclusion is drawn after the analysis of value.The steady development of the real estate industry companies depends largely on strong capital and inventory and timely reform, discounted cash flow method for assessing the value of the real estate business is also very strong applicably.