Following steps need to follow: a)Choose a set of sample company which is similar to the target company b)Determine Valuation Index which are generally Net Income, Dividend, Cash Flow, or Book Value of Asset etc. c)Calculate valuation Ratio, which can be one of the following Stock Price / Earnings per share Market Value / Equity […]
The calculation method and steps of the Discounted Income Method are similar to those of DCF model, except that discounted item is income. The advantage of this model is that it can objectively reflect the company’s performance. However, the disadvantages are that Income can be easily manipulated and it does not take into account the […]
The calculation method and steps of the Discounted Dividend Method are similar to those of DCF model, except that discounted item is the dividend. Since Chinese companies do not distribute dividend frequently, this method is not applicable in China.
There are two methods to determine the discount rate in DCF model: a) Weighted Average Capital Cost: K=We*Ke+(1-We)*Kd*(1-t) Where, K——weighted average capital cost of the company Ke——capital cost of equity Kd——capital cost of long-term debt before tax We——the ratio of equity to total asset t —— income tax rate b) CAPM Ke=Kf+β*(Km-Kf) Where, β—— market risk […]
The calculation formula is:
V=∑CFt/(1+i)
a) The successful application to holding 2008 Olympic game, the entrance to WTO and also the successful holding of APEC Conference have demonstrated the great development potential of China as well as the unlimited investment opportunity in Chinese capital market. b) The incorporation of reform and opening policy into law system has guaranteed a stable […]
Direct M&A is a purchase method where the purchasing company directly buys the asset and/or equity of the target company. The legal entity of the newly established foreign invested company can be either the purchasing company or the target company. The legal entity should not only take over the assets but also the liabilities.
Type Main Features Benefits Horizontal M & AMerge a competitor a) Achieve economies of scale b) Increase market share c) Enhance industry concentration Vertical M & AMerge a supplier or customer in the supply chain a) Extend the scope and depth of the business b) Save the transaction cost c) Improve coordination and specialization Mixed M & […]
a)Operation synergy: 1+1>2 Achieve economies of scale Take good advantages of the strengths of each side b)Financial synergy Reduce tax burden Smooth the fluctuation of cash flow Reduce capital needs Fully utilize free cash flow Reduce financing cost Improve finance capability c)Realize the potential value of the undervalued target company d)Increase the industry concentration e)Enhance the […]
Time Rule Content Before September1995 N/A No entity was legally allowed to transfer any corporate shares and state shares to foreign invested enterprises or foreign entities. August 1999 Provisional Ordinance Concerning Acquisition of State-owned Enterprise by Foreigner No specific rules were published for detailed implementation although it was allowed for foreigners to buy state-owned enterprises. November 2001 […]
