Improvement Of EVA Model In Enterprise Value Assessment-Compared With The DCF Model

With the continuous development of China’s asset appraisal industry, thetheoretical system of the enterprise value assessment has been gradually improved.The main problem in the field of the assessment theory and practice currently is thathow to evaluate the target company objectively and reasonably. As a newperformance evaluation index, EVA overcomes the defect of traditional indicators insome sense. Moreover, the value of the EVA model to maximize shareholders’ wealthalso works in concert with the target of the enterprise value assessment. Therefore,enterprise value assessment method based on EVA analysis provides us a new way tovalue the enterprisesFor DCF-based enterprise valuation model has been widely used in practice butnot the EVA-based one, three basic methods of enterprise value assessment are brieflyreviewed in the first part of this paper, focusing on the advantages and disadvantages,application status and limitations between the EVA model and the DCF model.Through analyzing both comparability of the EVA model and the DCF model incommon and differences, there are three suggestions for the EVA model’simprovement which is also combining its own limitations:(1)predigesting the dataadjustment of the EVA model;(2)studying the applicability of the EVA model;(3)compositing applications of the EVA model and the DCF model.On the basis of theoretical research, this paper aims to take HUAHAIPHARMACY as an example in order to make a reasonable accounting adjustmentand financial forecasting of this company and also to use two customer-basedcorporate valuation models, EVA and DCF, evaluating its values. These purposes willbase on analysis of the past performance about the data in financial statements from2008to2012and take the macroscopically and industrial conditions into account.Meanwhile, this paper compares assessment results of two methods with market valueof the listed company in order to analyze the advantage and disadvantage of EVA andDCF. In the end, it will draw a conclusion that which model is more suitable for thetarget company. Finally, based on the conclusion of the case study, the dissertation puts forwardthe countermeasures and suggestions for EVA model in evaluating. Furtherconsummates the assets appraisal theory system, and enrich the assets appraisalpractice method in our country.