DCF Valuation : Business Valuation Article by Corporate Valuation Team
Teaching Team of Advanced Financial Management 1 2015-9-13 1 Chapter 2 Corporate Valuation Brief...
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Transcript of Teaching Team of Advanced Financial Management 1 2015-9-13 1 Chapter 2 Corporate Valuation Brief...
Teaching Team of Advanced Financial Management 123/4/19 1
Chapter 2 Corporate Valuation
Brief contents:
Corporate value
Corporate valuation
Corporate value-based management
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Concepts and Features of Corporate
Value
Main Forms of Corporate Value
Influencial Factors of Corporate Value
Expressions of Corporate Value
一、企业价值概述Corporate Value
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1.Concept of Corporate Value
2.Financial Connotation of
Corporate Value
3.Features of Corporate Value
Concept and Features of
Corporate Value
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Corporate value means
how much a corporation
costs or how much a
corporation can be sold.
1.Concept of Corporate Value
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( 1 ) Total value
( 2 ) Liability value
( 3 ) Equity value
( 4 ) Corporate value
2.Financial Connotation of
Corporate Value
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( 1 ) Corporate value is the total value of
resources owned or controlled by
corporation
( 2 ) Corporate vale depends on
corporations’ future profitability
3.Features of Corporate Value
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( 3 ) Corporate value reflects time value
and risk value
( 4 ) Corporate value is the evaluation
results by market
( 5 ) Corporate value depends on many
factors,very dynamic
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1.Book value
2.Intrinsic value
3.Market value
4.Liquidation value
5.Replacement value
Main Forms of Corporate Value
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1.Future value-added ability
2.Corporate risk
3.Corporate going-concern
period
4.Other factors(non-financial)
Influencial Factors of Corporate Value
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1.Market pricing
2.Investments pricing
3.Cash flow pricing
Expressions of Corporate Value
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Implication of Corporate Valuation
Requirements and Significance of
Corporate Valuation
Procedures of Corporate Valuation
Methods of Corporate Valuation
Choice of Valuation Methods
Corporate Valuation
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Corporate valuation means analyzing
corporate future financial conditions
and assets value,that is,evaluating
and calculating going concern
corporations’ value
Implication of Corporate
Valuation
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1.Requirements should be
obeyed during corporate
valuation
2.Significance of valuation
Requirements and Significance
of Corporate Valuation
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( 1 ) Mathematical ( 2 ) Entirety
( 3 ) Accuracy ( 4 ) Definite
( 5 ) Unanimous
( 6 ) Comparative
1.Requirements should be obeyed
during corporate valuation
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( 1 ) Valuation in financial
management
( 2) Valuation in corporate mergers
( 3 ) Valuation in investment
portfolio
2.Significance of Corporate Valuation
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1.Fundamental work of
valuation
2.Performance forecasts
3.Choice of valuation methods
4.Carry out valuation
5.Results test and interpret
Procedures of Corporate Valuation
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1.Book Value Method
2.Discounted Cash Flow
Method
3.Market Value Method
4.Option Princing Medel
Methods of Corporate Valuation
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( 1 ) Assets Net Book
Value
( 2 ) Book Return Method
( 3 ) PV of Return Method
1.Corporate Book Valuation
n
tn
nt
t
i
P
i
DalueCorporateV
1 )1()1(=
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( 4 ) EVA Model
Corporate value=investments+PV of
EVA
EVA=NOPAT-After-tax dollar cost of
capital used to support operations
=EBIT(1-Corporate tax rate)-
(Operating Capital)(WACC)
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( 1 ) Discounted FCF Method
( 2 ) Corporate Constant Growth
Model
( 3 ) Nonconstant Growth Model
( 4 ) Life Cycle Model
2.Corporate Discounted FCF Method
tt
tt
a WAVCC
V
WACC
FCFTV
)1()1(
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(1)Capital Asset Pricing Model
(2)Q Model
Corporate Value
= Q×Asset replacement cost
3.Market Value Method
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4.Option Pricing Model
)]([)]([ 21 dNXedNPV tKRF
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1.Different evaluation methods can make
corporate valuation results different
2.Many subjective factors affect
valuation result
3.Avoid one valuation method’s one-
sidedness
Choice of Valuation Methods
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4.Weighted average values evaluated
by different methods
5.Detailedly examine target
corporation, consider all kinds of
risky factors,then determine true
corporate value
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Necessity of value-based management
Main Features of value-based
management
Ways to realize value-based financial
management
Corporate Value-based
Management
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1.Corporate value is the starting point and
core of modern financial management theory
2.Corporate value-added is the basic goal of
financial management
3.Value-based financial management is the
ideal model of modern corporations
Necessity of value-based management
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1.Future value is the core of value-based
management
2.Value-based management pays close attention
to cash flow management
3.Human value realization is the essence of value-
based management
Main Features of Value-based
Management
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4.Capital operation should be combined with
merchandise operation
5.Value-based financial decision is the
premise of corporate value-based
management
6.Corporate value-based management is
integrative and comprehensive
management to maximize stakeholders’
interests
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1.Adhere to corporate value maximization
goal,formulate value maximization strategies
2.From the viewpoints of value-added driving
forces, decide on value-added ratios, such as
long-term and short-term ratios,financial and
non-financial ratios, main operation and
concurrent operation goals
Ways to realize value-based
financial management
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3.Formulate value-based
budgets, determine steps to
realize those value-added
ratios in future, combine
value idea with every act.
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4.Value-based accounting system is the
carrier of value-based management,
recreating accounting is necessary
5.Determine value-based performance
measures and remunuration
systems,supervise performance according
to value-added ratios,encourage
employees to achieve their goals
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