Research On The Application Of Income Method In Evaluation Of Cultural Media Enterprises

The cultural media industry has developed rapidly in recent years,withing frequent transactions and higher premiums for industry merger and acquisition(M&A).China Securities Regulatory Commission(CSRC)has strengthened the supervision of M&A in cultural media industry,requiring the reasonable evaluation in target company.Based on the theory of Evaluation,paper discussed three methods.Through the comparison of advantages and disadvantages in three methods,paper combined the characteristics of operation and asset structure in cultural media industry,proposed that the income method is suitable for evaluation in cultural media enterprises.Aiming at the high premium of M&A in case company named X Media,paper applied the income method to evaluate the value of X Media.The core of application of income method is estimating the three parameters,which are Cash Flow,income period and discount rate in case company,withing the characteristics of income in the cultural media enterprise.According to the income characteristics of the cultural media industry,this study predicted the operating revenue of company.As the start point to operating revenue,paper predicted other financial index such as the operating cost and expected Cash Flow in X Media.According to the Capital Asset Pricing Model(CAPM)and risk level of similar listed company,paper measured the risk factor of X Media to calculated the discount rate.Finally,paper determined the value of X media by discounting the estimated Cash Flow,which is the measured discount rate.The research show that the valuation result can better reflect the future earning ability of company,due to the full consideration of the earning characteristics in X media.At the same time,compared with the result of the cost method,the result of the income method is closer to the price in M&A and the premium is reduced.Therefore,the income method should be adopted in the M&A activities of media enterprises because of this approach can correctly reflect the real value of acquired enterprise and contributing to the M&A decision-making of both sides.