Application of DCF Model in Enterprise Valuation

Research Article
Open access

Application of DCF Model in Enterprise Valuation

Xien Yu 1*
  • 1 Capital University of Economics and Business    
  • *corresponding author yu_xien@sina.com
Published on 10 November 2023 | https://doi.org/10.54254/2754-1169/31/20231524
AEMPS Vol.31
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-83558-083-7
ISBN (Online): 978-1-83558-084-4

Abstract

The home appliances industry is an important manufacturing industry that reflects the consumption level of Chinese residents. Midea Group is the leading enterprise in the household appliances industry and one of the enterprises with high brand value in China. For Midea Group in the home appliance industry, this paper will apply the DCF model for enterprise valuation. This paper mainly uses the financial information of Midea Group and the discounted cash flow model for enterprise valuation. Then, the advantages and disadvantages of the DCF valuation model are analyzed through practical cases, and the overall valuation process is summarized. The company value of Media that valued by the DCF model is 384,922.89 million RMB. The analysis results show that the DCF model can better reflect the status quo of enterprise value, but in the process of DCF valuation model, it is not easy to predict the accurate amount of future cash flow. It also has limitations in industry and product selection, and its estimation of the risk rate is not accurate enough.

Keywords:

discount cash flow (DCF) model, enterprise valuation, midea group, future cash flow, discount factor

Yu,X. (2023). Application of DCF Model in Enterprise Valuation. Advances in Economics, Management and Political Sciences,31,143-149.
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References

[1]. Lushun Zhou. (2016). Application research of enterprise value evaluation Method based on DCF model (Master's thesis, Chongqing University of Technology). https://kns.cnki.net/KCMS/detail/detail.aspx?dbname=CMFD201701&filename=1016231902.nh

[2]. Xiaonan Qiu. (2019). Research on valuation methods of listed companies in home appliance industry (Master's Thesis, Zhejiang University). https://kns.cnki.net/KCMS/detail/detail.aspx?dbname=CMFD202001&filename=1019926084.nh

[3]. Google finance, Midea Group Co Ltd. (2022). https://www.google.com/finance/quote/000333:SHE?sa=X&ved=2ahUKEwiKxZTxo38AhWpX_EDHUZTDZUQ3ecFegQIKhAb

[4]. Textor, C. (2022). Inflation rate in China from 2011 to 2021 with forecasts until 2027. https://www.statista.com/statistics/270338/inflation-rate-in-china/

[5]. Datayes! (2022). Online:https: //robo.datayes.com/v2/landing/analyst_expect

[6]. Midea Group Co Ltd. (2022). Online:https: //www.midea.com/cn/Investors/Financial_Reports

[7]. Treasury bond for Chinese Government, Online: https://www.google.com/search?q=chinese+risk+free+rate&oq=Chinese+risk+free+rate&aqs=chrome.0.0i512j0i22i30l4j0i390l2.7138j1j7&sourceid=chrome&ie=UTF-8

[8]. Textor, C. (2022) Growth rate of real gross domestic product (GDP) in China from 2011 to 2021 with forecasts until 2027. Available at: https://www.statista.com/statistics/263616/gross-domestic-product-gdpgrowth-rate-in-china/

[9]. Yahoo Finance. (2022). Statistics. Available at: https://finance.yahoo.com/quote/000333.SZ/key-statistics?p=000333.SZ

[10]. Jiang Liu. (2022). Research on Valuation Model Optimization of Home Appliance Enterprises under Digital Transformation (Master's Thesis, East China Normal University).https://kns.cnki.net/KCMS/detail/detail.aspx?dbname=CMFD202202&filename=1022578602.nh

Cite this article

Yu,X. (2023). Application of DCF Model in Enterprise Valuation. Advances in Economics, Management and Political Sciences,31,143-149.

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About volume

Volume title: Proceedings of the 7th International Conference on Economic Management and Green Development

ISBN：978-1-83558-083-7(Print) / 978-1-83558-084-4(Online)
Editor：Canh Thien Dang
Conference website: https://www.icemgd.org/
Conference date: 6 August 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.31
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Lushun Zhou. (2016). Application research of enterprise value evaluation Method based on DCF model (Master's thesis, Chongqing University of Technology). https://kns.cnki.net/KCMS/detail/detail.aspx?dbname=CMFD201701&filename=1016231902.nh

[2]. Xiaonan Qiu. (2019). Research on valuation methods of listed companies in home appliance industry (Master's Thesis, Zhejiang University). https://kns.cnki.net/KCMS/detail/detail.aspx?dbname=CMFD202001&filename=1019926084.nh

[3]. Google finance, Midea Group Co Ltd. (2022). https://www.google.com/finance/quote/000333:SHE?sa=X&ved=2ahUKEwiKxZTxo38AhWpX_EDHUZTDZUQ3ecFegQIKhAb

[4]. Textor, C. (2022). Inflation rate in China from 2011 to 2021 with forecasts until 2027. https://www.statista.com/statistics/270338/inflation-rate-in-china/

[5]. Datayes! (2022). Online:https: //robo.datayes.com/v2/landing/analyst_expect

[6]. Midea Group Co Ltd. (2022). Online:https: //www.midea.com/cn/Investors/Financial_Reports

[7]. Treasury bond for Chinese Government, Online: https://www.google.com/search?q=chinese+risk+free+rate&oq=Chinese+risk+free+rate&aqs=chrome.0.0i512j0i22i30l4j0i390l2.7138j1j7&sourceid=chrome&ie=UTF-8

[8]. Textor, C. (2022) Growth rate of real gross domestic product (GDP) in China from 2011 to 2021 with forecasts until 2027. Available at: https://www.statista.com/statistics/263616/gross-domestic-product-gdpgrowth-rate-in-china/

[9]. Yahoo Finance. (2022). Statistics. Available at: https://finance.yahoo.com/quote/000333.SZ/key-statistics?p=000333.SZ

[10]. Jiang Liu. (2022). Research on Valuation Model Optimization of Home Appliance Enterprises under Digital Transformation (Master's Thesis, East China Normal University).https://kns.cnki.net/KCMS/detail/detail.aspx?dbname=CMFD202202&filename=1022578602.nh

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