Abstract
The article aims at evaluating a specific enterprise of the Real Estate segment using FCFF (Free Cash Flow to Firm) method. This technique determines the company’s value through free cash flows. Enterprise valuation presents a distinct discipline requiring appraiser’s deep understanding not only of the evaluated enterprise but also other external decisive influences. The theoretical part focuses on calculation procedures using The CAPM (Capital Asset Pricing Model) model quantifying separate variables that determine discount rates. The suggested technique deals with specific financial data of the company and is applicable in evaluating small and medium-sized enterprises.
Highlights
Enterprise valuation currently presents an extensively discussed issue in terms of economy and finance
Performance indicators built on values are superior to traditional ratios such as earnings per share (EPS), return on equity (ROE), return on assets (ROA) etc
Determining the value of the enterprise employs the method of discounted free cash flow FCFF
Summary
Enterprise valuation currently presents an extensively discussed issue in terms of economy and finance. Developed economies use the technique of property valuation upon business mergers or acquisitions. Prognosis generators, e.g. revenue estimates, operating profit margin, working capital and investments, will deliver the valuation. These generators carry out a preliminary valuation of the company which is, informative and its value indicates only provisional estimate [6]. The property valuation method presents a distinct and complex discipline, considering the enterprise value from different aspects. The article aims at applying the method of valuation by discount free cash flows conducted on a specific enterprise. The result suggests strong sides and shortcomings of the technique to recommend the use of this method of valuation
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