The value of a business is an objective indicator of its functioning, the present value of future benefits from owning it. It provides an indication of the most likely price at which a business could be alienated in the open market in a competitive environment.
Instructions
Step 1
If you want to calculate the value of a business in the forecast period, then use the discounted cash flow method. It involves the application of a discount rate, i.e. the interest rate used to bring future income to its present value. In this case, the forecasted value of the business will be calculated as follows: P =? CFt / (1 + I) ^ t, where CFt is the cash flow for the period t; I is the discount rate; t is the number of the period at the beginning of which the business is evaluated.
Step 2
But you must understand that the company continues its work in the post-forecast period. Depending on the development prospects of the company, various options are possible: from its stable growth to bankruptcy. To evaluate a business, you can use the Gordon model, which assumes that the rate of growth in sales and profits is stable, and the amount of depreciation is equal to the amount of capital investment. In this case, the value of the business is determined as follows: Р = CF (t + 1) / (Ig), where CF (t + 1) is the cash flow in the first year of the post-forecast period; I is the discount rate; g is the growth rate of the cash flow. the model is advisable to apply if the sales market capacity is large, the supply of raw materials and materials is stable, the enterprise has access to the necessary financial resources, and the market situation is favorable.
Step 3
If in the post-forecast period the bankruptcy of the enterprise is expected with the further sale of its property, then use the following calculation: P = (A-O) x (1 - Lav) - Rlik, where A is the sum of assets, taking into account revaluation; O is the amount of liabilities; Lav is a discount for the urgency of liquidation; Rlikv - liquidation costs. This includes insurance, tax, administrative expenses, appraisal fees, staff benefits. The residual value is influenced by the location of the enterprise, the situation in the industry, the quality of assets and other factors.
