Research On Value Assessment Of The Real Estate Enterprises Based On EVA

With the rapid development of economy in China, the real estate industry has been developing with tremendous speed. It gradually becomes the pillar industry in our national economy. At present, there is a small number of leading enterprises of China’s real estate industry. And the real estate market is not mature enough. On the one hand, housing prices are affected by the macro-control policies and the psychological expectations of investors. A lot of speculation is still in the real estate industry. On the other hand, with the pressure of national macro-control policies, real estate enterprises which need large amounts of funds as for support are gradually facing the risk of lacking of funds and cash flows. At the same time, mergers and acquisitions among real estate enterprises continue to emerge. All these factors influence the housing price to a certain degree, leading the price deviates from the intrinsic value which is not good for the investors’ decision-making. Therefore, study on the method of evaluating real estate enterprises scientifically, so as to provide reasonable reference for investors and merger and acquisition decision makers, having become a new hot point in the research field.In recent years, affected by the tight-money policy, real estate enterprises invest more own-funds in the operation. The cost of equity capital increases so that the appraiser cannot neglect its influence on enterprise value. However, the traditional financial indicators only consider the cost of debt capital and ignoring the cost of equity capital, leading the assessment result cannot reflect the true operating performance and companies’capacity of creating value. Under this background, this paper researches on the EVA (economic value added) valuation model which considers both debt capital cost and equity capital cost. This valuation model has its significant advantages over the traditional ones, such as eliminating part of accounting information distortion effect, reflecting true operating performance and so on. Therefore, the application of EVA evaluation method is a beneficial exploration, having deep influence on companies’ merger and reorganization and promoting the long-term development of the real estate business.The methods used in the thesis:This paper mainly not only uses the method of integrating qualitative analysis with quantitative analysis, but also uses the method of case analysis on the basis of theory. Through theoretical analysis, the reader can deepen the understanding of theory and grasp the criterion of theory. And the case study of VANKE Company will be helpful to improve research value of EVA theory during the practice.The main content and structure of the thesis:First part is an introduction. Firstly, put forward the research purpose and significance from the hot issues of current real estate industry, and the purpose and significance is based on the typical characteristics of real estate industry, secondly, state the literature review on the basis of reading literature related with EVA from domestic and overseas scholars; thirdly, explain the research methods and contents.The second chapter is a review of EVA evaluation theory and building of model. First of all, introduce the concept of EVA and EVA evaluation theory; and then, focus on explaining relevant adjustments based on the basic principle of EVA and characteristics of real estate enterprises; what’s more, elaborate method of calculating net operating profit after tax, total capital and weighted average cost of capital; and finally, establish EVA evaluation model analyze its advantages.The third chapter is case analysis. Firstly, give a brief introduction of China Vanke Co.Ltd; and then, conduct financial analysis, including solvency analysis, operation ability analysis and profitability analysis and development ability analysis; then, calculate history EVA of Vanke with the method stated in the second chapter; and finally, predict the future EVA based on the financial analysis and historical development situation, calculate the value of Vanke.The fourth chapter is conclusion. First of all, compare evaluation results with stock price on the base date of assets evaluation, get the conclusion of that Vanke’s value has been undervalued by the market and analyze the reasons; then, give suggestions about improving the enterprise value. They are including improving the ability of strategic management, improving management performance evaluation system, transforming from profit management to value management; and finally, analyze deficiencies of the application of EVA evaluation model. They are including obstacles of calculating EVA accurately, being subjective to a certain degree when appraisers predict the future EVA discount rate, the selection of the standards is not unified and EVA evaluation system does not consider the non financial index.