Author(s)

Qianhao Li

Corresponding Author

Qianhao Li

Abstract

To value a rm, there are usually two di erent methods, namely direct val-uation and relative valuation. When referring to direct valuation, we calculate the intrinsic value using the idea of time value of money (TVM) to convert fu-ture cash ow into its present value under a proper discount rate. This method could give us a clear image of how much we value a rm or equity. As for relative valuation, it is a method that usually gives investors an overall idea of comparison among similar companies. We use multiples, or indices, in relative valuation such as P/E, P/B and many other ratios which all function di er-ently as indicators of pro tability of a rm. In this paper, we will utilize the rst method, direct valuation, to value rms.

Keywords

Enterprise; Value; Economy; Finance