Corporation Value Assessment Based On Free Cash Flow

As the Chinese economy enters a new normal,“de-leveraging,debt reduction” has become one of the goals of many industries.The real estate industry as one of China's important industries is no exception.In this context,the real estate industry is facing an unprecedentedly grim situation,and many housing companies are beginning to seek transformation.Equity sales,mergers and acquisitions and restructurings have occurred more frequently in the real estate industry.Therefore,the demand for real estate enterprise value assessment is also growing.Based on this situation,this paper believes that it is meaningful to study the value assessment of real estate enterprises under the new economic situation.One of the main contents of this paper is to select the appropriate evaluation method.At the end of the paper,the free cash flow method is selected to evaluate the value of real estate enterprises.Another major research content of this paper is the construction of a free cash flow discounting model.After considering the evaluation requirements comprehensively,the two-stage growth model was selected as the basic model.The last main part of this paper is to conduct case analysis.The object of case analysis is selected from Country Garden,a representative real estate enterprise in China.Finally,using the estimated parameters to predict the enterprise value of Country Garden,the predicted enterprise value is not much different from the market value of the enterprise at the time of evaluation,which proves the applicability of using FCFF to evaluate the value of Country Garden enterprise.Therefore,this paper argues that the free cash flow method is applicable to the valuation of real estate companies with similar nature to Country Garden.The innovation of this paper is mainly to analyze the value characteristics of real estate enterprises.In the past literature,there was little analysis of corporate value types before using FCFF.In fact,a company has a high probability of not only operating one type of business,which makes it unreasonable to make a combination of indicators such as discount rate and growth rate.A more accurate approach should be to separate the different lines of business,separately predict the parameters,and finally combine them to determine the final corporate value.But if this is the case,the difficulty will increase dramatically and become extremely complicated.Therefore,it is necessary to analyze the type of enterprise value before using FCFF.This paper believes that if the revenue generated by a business accounts for more than 95% of the total revenue,the impact of other businesses can be neglected.In this case,the free line of cash flow can no longer be predicted by the line of business.The rationality of using FCFF is greatly enhanced and the reliability of the evaluation results is increased,and a more complicated calculation process is also avoided.In general,this paper uses a variety of methods in writing,such as theory and practice,case analysis and comparative analysis.It finally proved the applicability of the free cash flow method to the valuation of real estate companies such as Country Garden.I believe that it can provide some help for the development of the assessment work and the decision of the corporate strategy.It also benefits the development of China's economy.