Comparative Research Of FCFF And EVA Valuation Model In Business Valuation Applications

With the constant improvement of China's capital market as well as the deepening of economic reform,the role of assessment enterprise value will become increasingly important in the investment and financing activities.The choices of enterprise evaluation method will affect the results of the assessment and affect investors' decisions.Discounted Free Cash Flow valuation models(FCFF)and Economic Value Added valuation models(EVA)are two methods of valuation under the Income Approach system.The Discounted Free Cash Flow valuation models(FCFF)is Western mainstream business valuation method and Economic Value Added valuation models(EVA)is a new method.This paper elaborates the principle and application of the Discounted Free Cash Flow valuation models(FCFF)and Economic Value Added valuation models(EVA)in business valuation,and selects valuation project of MCKH Ltd.acquired 70% stake in PT gardens as research subjects,then use FCFF and EVA to assess the overall enterprise value PT garden and 70% interest.The study found that:Firstly,The application of FCFF and EVA valuation method has advantages and disadvantages in business valuation.Secondly,It has a difference of 7.6% between the results of DCF valuation and EVA valuation method.The result of EVA valuation method is closer to the final price,and it is better in the PT Garden's value assessment.The result of FCFF valuation method is 6% higher than the deal price.And the result of EVA valuation method is 1.6% lower than the deal price.Thirdly,With the rapid development of China's economy,the capital market increasingly mature,the accounting system and standards in line with international standards,the application of FCFF valuation models will be more extensive,and the effectiveness and feasibility of EVA estimation model will become increasingly prominent in our country.