Chapter 2 Corporate Valuation
Brief contents:
Corporate value
Corporate valuation
Corporate value-based management
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一、企业价值概述
Corporate Value
Concepts and Features of Corporate Value
Main Forms of Corporate Value
Influencial Factors of Corporate Value
Expressions of Corporate Value
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Concept and Features of
Corporate Value
1.Concept of Corporate Value
2.Financial Connotation of
Corporate Value
3.Features of Corporate Value
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1.Concept of Corporate Value
Corporate value means how
much a corporation costs or
how much a corporation can
be sold.
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2.Financial Connotation of
Corporate Value
（1）Total value
（2）Liability value
（3）Equity value
（4）Corporate value
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3.Features 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
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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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Main Forms of Corporate Value
1.Book value
2.Intrinsic value
3.Market value
4.Liquidation value
5.Replacement value
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Influencial Factors of Corporate Value
1.Future value-added ability
2.Corporate risk
3.Corporate going-concern period
4.Other factors(non-financial)
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Expressions of Corporate Value
1.Market pricing
2.Investments pricing
3.Cash flow pricing
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Corporate Valuation
Implication of Corporate Valuation
Requirements and Significance of
Corporate Valuation
Procedures of Corporate Valuation
Methods of Corporate Valuation
Choice of Valuation Methods
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Implication of Corporate
Valuation
Corporate valuation means analyzing
corporate future financial conditions and
assets value,that is,evaluating and
calculating going concern corporations’
value
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Requirements and Significance
of Corporate Valuation
1.Requirements should be obeyed
during corporate valuation
2.Significance of valuation
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1.Requirements should be obeyed
during corporate valuation
（1）Mathematical
（2）Entirety
（3）Accuracy
（4）Definite
（5）Unanimous
（6）Comparative
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2.Significance of Corporate Valuation
（1）Valuation in financial management
（2) Valuation in corporate mergers
（3）Valuation in investment portfolio
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Procedures 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
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Methods of Corporate Valuation
1.Book Value Method
2.Discounted Cash Flow Method
3.Market Value Method
4.Option Princing Medel
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1.Corporate Book Valuation
（1）Assets Net Book Value
（2）Book Return Method
（3）PV of Return Method
n
Dt
Pn
CorporateValue＝

t
n
(
1

i
)
(
1

i
)
t 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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2.Corporate Discounted FCF Method
（1）Discounted FCF Method
FCFt
Vt
TVa  

t
(1  WACC ) (1  WAVCC) t
（2）Corporate Constant Growth Model
（3）Nonconstant Growth Model
（4）Life Cycle Model
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3.Market Value Method
(1)Capital Asset Pricing Model
(2)Q Model
Corporate Value
＝Q×Asset replacement cost
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4.Option Pricing Model
V  P[ N (d1 )]  Xe
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 K RF t
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[ N (d 2 )]
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Choice of Valuation Methods
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
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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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Corporate Value-based
Management
Necessity of value-based management
Main Features of value-based management
Ways to realize value-based financial
management
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Necessity of 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
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Main Features 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
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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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Ways to realize value-based
financial management
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
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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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