Offer for Shang-Wa There are a number of methods that can be used to assess the value of a firm in order to determine an offer that is not only fair but attractive. The most basic way of valuing a company is by looking at the book value. The value of the physical assets of company is used to give the book value of a firm. The book value may be defined as the net assets of a company; the assets less the liabilities. The formula is that the book value is the assets less the liabilities. Assets Liabilities Book value 142,292.00 105,877.00 36,415.00
This is the value of a firm if the assets were to be sold off1, but a firm is more than a collection of assets, it is also the value of the future revenue streams. In addition to the book value there will be the future cash flow, One model that can be used is that of the dividend discount model. This is often based on the use of dividends, but may also be used on net revenues where the value of the revenue streams is valued. To undertake this it is necessary to look at the future revenues streams, but as we only have the next five years the full dividend discount model is not suitable as this requires longer term investment returns and although there is a growth rate of 30% factored in, it is unlikely that this would continue. With a different assumpt