Abstract
This paper deals with the determination of the intrinsic value of the company Seznam.cz, a.s. using discounted cash flow. Specifically, it is concerned with determining the value of the business from the perspective of the company’s shareholders. The Free Cash Flow to Equity (FCFE) method is chosen for analysis and determination of the value. According to this method, the specific FCFE values are discovered. However, the enterprise value must also be analyzed on the basis of other key indicators, such as financial leverage, the Capital Asset Pricing Model (CAPM) method, or the net present and future value of the FCFE. This is especially important so that the results can be put into mutual relations and a sufficient representative value of the FCFE results can be achieved. Input values stem from the company’s annual reports. From the results of the mentioned methods and indicators, it was found that the value of the FCFE is quite high, which means that the capital used is used appropriately. Based on the result of the continuing value of the FCFE, it can be said that the company’s intrinsic value is at a very good level.
Highlights
Determining the value of a company is one of the most frequent and intensively used but, at the same time, relatively complicated operations, and it can be viewed from a number of perspectives
The enterprise value must be analyzed on the basis of other key indicators, such as financial leverage, the Capital Asset Pricing Model (CAPM) method, or the net present and future value of the Free Cash Flow to Equity (FCFE)
We address the FCFE option—we determine the value of a company based on the fact that part of its capital can be taken from it
Summary
Determining the value of a company is one of the most frequent and intensively used but, at the same time, relatively complicated operations, and it can be viewed from a number of perspectives. From the point of view of management, potential investors, or credit companies, the substantive value is important, as it may have a higher information value from their perspective They may focus on net assets [3] or the revenue approach, such as discounted cash flows [4]. In determining the intrinsic value of the company, it is appropriate to use the Free Cash Flow to Equity model, hereinafter referred to as the FCFE, which consists in determining free financial means for owners reduced by all liabilities to creditors. Barealey, Myers, and Allen [8] present methods for determining the Net Present Value of specific assets of valued companies The use of this model is most suitable for companies that are referred to as Going Concerns [9]. This helps to respond to a forthcoming economic crisis early, and can minimize the negative consequences for individual companies
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