EVALUATING S.C. AZOMUREŞ S.A. BASED ON FCFE
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Authors:
• Andreea NEGRU, Ph.D.Student, email: andreea.negru@money.ro, Afiliation: Academy of Economic Studies, Bucharest, Romania
• Sorin-Iulian CIOACĂ, Ph.D.Student, email: cioaca_sorin@yahoo.co, Afiliation: Academy of Economic Studies, Bucharest, Romania
• Mihai Cristian DINICA, Ph.D.Student, email: mihai.dinica@gmail.com, Afiliation: Academy of Economic Studies, Bucharest, Romania
• Ana-Maria BURCĂ, Ph.D.Student, email: burca.anamaria@yahoo.com, Afiliation: Academy of Economic Studies, Bucharest, RomaniaPages:
• 21|26 -
Keywords: mergers, free cash flow, cash flow
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Abstract:
Against the current economic and financial background, which increases the importance of merger and acquisition1, a situation also facilitated by the integration of national capital markets, the evaluation of the company becomes a very significant topic. An economic fact over the past years on the mergers and acquisitions market is the involvement of an increasingly larger number of companies from emerging markets into such operations, which resulted in the fact that the most used evaluation method is the Discounted Cash Flow Analysis, given that capital markets were insufficiently developed in those countries, and/or the fact that many of those companies are not listed at stock exchanges. Other evaluation methods used in the financial theory and practice – namely, the discounted dividend valuation model (Gordon), the market multiples analysis and the residual income valuation are less applicable in evaluating those companies, according to Fabozzi (2010). A company’s market value is estimated based on free cash flow to the firm (FCFF) or on free cash flow to equity (FCFE), discounted according to the relevant rates. The evaluation of S.C. Azomureş S.A., listed as First Category at the Bucharest Stock Exchange will be using an evaluation based on the free cash flow for the firm model and the Monte Carlo simulation technique, which will help us estimate a range of potential values of the company’s net worth.
