The Application Of The Combination Of DCF And B-S Pricing Model In Enterprise Valuation

As a representative of the private enterprises in our country,Geely Holding Group acquired the famous brand Volvo automobile company which has 1 billion 500 million net assets,brand assets is nearly ten billion with $1 billion 800 million,in 2010.There is no doubt that Geely's acquisition of Volvo to achieve win-win due to the reasonable assessment of the enterprise value.In the daily investment decision,the enterprise value evaluation helps the managers to take the maximum value at the lowest cost.In addition,to assess its value with scientific methods,is benefit to optimize the management system,improve management efficiency,develop a long-term strategy;Help financial institutions to carry out the credit rating of the enterprise,whereby the underwriting of new shares;Help public investors to invest rationally in the securities of listed companies.The reasonable evaluation of enterprise value is remarkable,but it is not easy to make the assessment as accurate as possible.The information asymmetry between the investor and the investor and the uncertainty of the operation of the enterprise are the bottleneck of the accuracy.The current mainstream method of enterprise value assessment is DCF discount method.To predict enterprise future cash flow first,and then calculate the cash flow's present value with certain discount rate,the summary of the present value of the net cash flow is the enterprise value.The enterprise DCF discounted future earnings evaluation from the enterprise view of value,ability to focus on long-term growth management value,therefore has been the theory and practice of the assessment of the value obtained favor,revision and development of ancient scholars constantly.Practice has proved that,compared with other methods of value assessment,the DCF model has a significant effect on the enterprise value which is used to evaluate the stability and maturity of the enterprise.But the traditional DCF model is a static evaluation method.It is established on the basis of "reversibility" of investment,and the application of DCF model assumes that the cash flow of enterprises is stable and the trend of growth is not biased.Therefore,this paper introduced the B-S model to evaluation of enterprise value on the base of the existing stable income business valuation to make up for its lack of DCF model.According to the characteristics of enterprise have two kinds of ability that existing business ability and potential profits ability.To establish a comprehensive evaluation method to evaluate existing stable income and potential profitability,constructs the valuation model is applicable to various components of the value.The DCF model and the B-S pricing model are introduced respectively in the enterprise valuation.Take advantage of the different characteristics of the two models and calculate the overall value of the enterprise.With the non-ferrous metal industry representative enterprises in Tongling Nonferrous Metals Group Limited by Share Ltd in recent years,the financial data and the new mining rights of enterprises at present stable free cash flow and the present value of the project contains the uncertainty in the future development of value estimation.To obtain the overall value of the enterprise including the existing stable income and the potential profit value.Finally,verify the effectiveness of the results of the case enterprise value assessment,and concluded that the method established in this paper can accurately estimate the value of Tongling nonferrous metals.The main content of this paper is organized as follows: The first part is introduction.The second part is the overview of enterprise valuation,DCF model and B-S Pricing Model.Firstly,this part defines the concept of enterprise valuation.And then it describes the basic method of business valuation.Thirdly,it explains the reason combined DCF model with B-S model.Finally it clears the theoretical basis of business valuation.The third part is the program which combined DCF model with B-S model for valuating enterprise.Analyze the constitution of enterprise value and evaluate stable income value and profitability potential value.The forth part is evaluating the price of Tongling Nonferrous Metals Co.,Ltd with above mentioned program and assessing its effectiveness.The last part is summarizing the experience and inspiration of the application which combined DCF model with B-S model to evaluate enterprise.In this paper,enterprise valuation methods to explore achieved the following conclusions:(1)With the help of enterprise value analysis,enterprise is divided according to the different nature of the proceeds.The binding properties characteristic of income using different assessment methods to construct a suitable potential profitability of the business valuation mixed valuation models.Binding the characteristics of income using different assessment methods to construct a suitable mixed valuation model of the enterprise valuation which is included potential profitability.(2)The introduction of DCF model,combined with the current financial status and operating results of the parameter estimates the discount model,evaluation of enterprise existing stable profit ability value.(3)The introduction of B-S model based on real options method,identify enterprise projects with the option properties.It can make up for the defect of traditional valuation methods which underestimate the overall enterprise.