1, cash flow discount method
1) method basis. Discounted cash flow method is the most commonly used method for enterprise value analysis. This method uses discounted cash flow method model to calculate enterprise value. According to this model, the value of all assets is equal to the present value of future cash flows generated by the assets.
The key to the correct use of cash flow discount method lies in:
① Estimation of cash flow in the future;
② Estimation of discount rate with risk;
③ Estimation of the length of time. The asset in the formula can be any asset, but in the enterprise value analysis, it refers to the specific analysis object, such as enterprise entity, equity and so on.
2) Method classification. According to the different cash flow models of future income, cash flow discount models can be divided into equity cash flow model and enterprise overall cash flow discount model. The equity discounted cash flow method model measures the equity value of investors, while the discounted cash flow method model of the whole enterprise measures the whole enterprise value, which should be equal to the whole enterprise value minus the value of creditor's rights. Analysts should pay attention to the matching of cash flow and discount rate when choosing analysis model, otherwise the enterprise value will be overestimated or underestimated.
No matter which model is adopted, the cash flow method is based on the expected cash flow and discount rate, so this method is suitable for the company's current cash flow is positive, the future cash flow and cash flow risk can be reliably estimated, and the company's discount rate can be calculated.
2. Economic profit method
1) The meaning of economic profit. Economic profit refers to the residual income of enterprise income after deducting all costs, which is equal to earnings before interest and tax minus debt and equity costs in quantity.
Economic profit = earnings before interest and tax-capital occupation expense = earnings before interest and tax-debt cost-equity cost = earnings before interest and tax-occupied capital × weighted average cost rate of capital = occupied capital × (return on capital-weighted average cost rate of capital).
Economic profit method is a method to measure enterprise value based on economic profit. According to this method, the enterprise value is equal to the present value of all investment capital plus the estimated economic profit. Different from accounting profit, economic profit is a kind of profit in the economic sense, which takes the necessary rate of return of investors as the deduction of income. When calculating economic profit, not only the cost of debt capital should be deducted, but also the cost of equity capital should be deducted according to the investment return required by shareholders. The cost of equity capital is an opportunity, which does not conform to the definitions of accounting cost and expense elements, so it is not considered in accounting.
2) Value evaluation model. Finance believes that only the income exceeding the total cost is the source of enterprise value, so the enterprise value under the economic profit method is equal to the total capital and present value of the future value created by the enterprise, that is, the sum of the total capital and present value of the future economic profit created by the enterprise.