The Application Of DCF Method In Evaluation Of Housing Rental Companies

With the reform and opening up and economic globalization going deep,as a member of the microscopic economic subject, enterprise plays a very active role the economy’s stormy seas. the enterprise value evaluation is absolutely necessary in mergers and acquisitions, equity transfer and so on. whether we can get a objective and reasonable evaluation value is closely related to the success of the enterprise’s economic activities. The enterprise is the fundamental part of the national economy, so the enterprise value evaluation can affect the development process of the whole national economy. The choice of evaluation methods for enterprise value assessment determines the accuracy of the evaluation results, so there is a growing number of scholars in the field of how to choose a reasonable method for the enterprise value assessment. At present, there are three method that are widely used in the enterprise value evaluation : market approach, cost approach, discounted cash approach. Due to different types of enterprises and different aims, The use of these three methods are limited by different factors. In this paper, based on the particularity of evaluation of enterprise and the comparative analysis of the applicability of the three methods, we find that the DCF model method is the most suitable method to evaluate this enterprise’s value.In this paper, the enterprise to be evaluated is an enterprise mainly engaged in commercial real estate leasing and its main business income mainly comes from the real estate rental income. In the case analysis of this article, according to the characteristics of this enterprise and its evaluation purpose which is equity acquisition, this paper discusses the applicability of DCF model method in the enterprise value evaluation. According to the characteristics of the evaluated enterprise, this case study used the evaluation model of fixed number of year of the limited income that one of the DCF model, broking the conventional method of DCF model that using sustainable revenue model. Furthermore, combining the specific circumstances of the enterprise be evaluated, this case study analyzes the applicability of this model. When using DCF model method for evaluating LK’s overall assets, the paper improves the traditional DCF model method. It not only can evaluate the operational assets of the enterprise, but also can evaluate the non-operating assets(debts)of the enterprise. Therefore, it is effectively prevent underestimating the enterprise value by traditional DCF model. This paper makes the DCF model method into specific case analysis. And the process of the evaluating the enterprise’s value was completely expressed. It provides valuable reference for the evaluation of similar enterprises.