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


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


1.Concept of Corporate Value

2.Financial Connotation of

Corporate Value

3.Features of Corporate Value

Concept and Features of

Corporate Value


Corporate value means

how much a corporation

costs or how much a

corporation can be sold.

1.Concept of Corporate Value


（ 1 ） Total value

（ 2 ） Liability value

（ 3 ） Equity value

（ 4 ） Corporate value

2.Financial Connotation of

Corporate Value


（ 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


（ 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


1.Book value

2.Intrinsic value

3.Market value

4.Liquidation value

5.Replacement value

Main Forms of Corporate Value


1.Future value-added ability

2.Corporate risk

3.Corporate going-concern

period

4.Other factors(non-financial)

Influencial Factors of Corporate Value


1.Market pricing

2.Investments pricing

3.Cash flow pricing

Expressions of Corporate Value


Implication of Corporate Valuation

Requirements and Significance of

Corporate Valuation

Procedures of Corporate Valuation

Methods of Corporate Valuation

Choice of Valuation Methods

Corporate Valuation


Corporate valuation means analyzing

corporate future financial conditions

and assets value,that is,evaluating

and calculating going concern

corporations’ value

Implication of Corporate

Valuation


1.Requirements should be

obeyed during corporate

valuation

2.Significance of valuation

Requirements and Significance

of Corporate Valuation


（ 1 ） Mathematical （ 2 ） Entirety

（ 3 ） Accuracy （ 4 ） Definite

（ 5 ） Unanimous

（ 6 ） Comparative

1.Requirements should be obeyed

during corporate valuation


（ 1 ） Valuation in financial

management

（ 2) Valuation in corporate mergers

（ 3 ） Valuation in investment

portfolio

2.Significance of Corporate Valuation


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


1.Book Value Method

2.Discounted Cash Flow

Method

3.Market Value Method

4.Option Princing Medel

Methods of Corporate Valuation


（ 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(＝


（ 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)


（ 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(


(1)Capital Asset Pricing Model

(2)Q Model

Corporate Value

＝ Q×Asset replacement cost

3.Market Value Method


4.Option Pricing Model

)]([)]([ 21 dNXedNPV tKRF


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


4.Weighted average values evaluated

by different methods

5.Detailedly examine target

corporation, consider all kinds of

risky factors,then determine true

corporate value


Necessity of value-based management

Main Features of value-based

management

Ways to realize value-based financial

management

Corporate Value-based

Management


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


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


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


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


3.Formulate value-based

budgets, determine steps to

realize those value-added

ratios in future, combine

value idea with every act.


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

Teaching Team of Advanced Financial Management 3223/4/19 3223/4/19

teaching team of advanced financial management 1 2015-9-13 1 chapter 2 corporate valuation brief...

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