A Study On The Problems About The Equity Evaluation Case Of G Group

It is generally known that China is in the key period of transformation and upgrading of economic structure.In order to achieve the goal of transforming the style of economic increase from extensive form to intensive form,adjusting the economic structure will be the general orientation in a long time as before.Under this circumstance,it is advocated that we should keep up with the speed of optimization and integration of resources.Therefore,more and more cases about the transfer of shares are exhibited and equity valuation acts a more and more important role.So,it is necessary for us to make a deep research on the equity valuation with the purpose that we can evaluate the equity more accurately from a new perspective.This paper expounds two methods of equity valuation firstly,which are free cash flow discount method(DCF method)and residual income rate method(RIR method),elaborating the similarities and differences between them and analyzing the advantages and disadvantages in the use of equity valuation in the same time.Secondly,we chose the case of equity valuation about G group.In this paper we find the problems in the process of evaluation after exhibiting the evaluation process from parent company perspective with the DCF method briefly.And then,aiming at the problems in the case,we try to solve them from merged perspective with the method of RIR.Finally,what elaborated are the conclusions and inspiration from this case.We do this for the purpose that this paper can provide a new idea and reference for the study on equity valuation in the future.The paper holds that evaluation of group companies from merged perspective can not only eliminate the effect of connected transaction,but also can solve the problem of parent company grabbing the customers of its subsidiaries to overestimate the expected return in this case.And with regard to equity evaluation,RIR method can evaluate the equity directly,however,DCF method should get the whole enterprise value firstly and then take away the value of surplus assets and so on.Namely DCF method cannot evaluate the equity directly,so RIR method may be more suitable for equity evaluation.