Valuing Small Businesses: Discounted Cash Flow, Earnings Capitalization and the Cost of Replacing Capital Assets
比较了折现现金流和收益资本化两种小企业估值模型，发现结果差异显著，并提出改进收益资本化模型的方法，使其估值更接近理论正确的折现现金流模型。
When valuing small businesses, practitioners have a number of models from which to choose. The model most commonly chosen does not have strong theoretical support literature. The model advocated literature as being theoretically correct is seldom chosen practice. This article will show that results obtained under these models can be significantly different. The discussion proposes a modification of most commonly used method, which will result valuations more agreement with model advocated literature. Current literature stresses importance of discounted cash flow (DCF) model (Carland and White 1980, Lloyd and Hand 1982, and Burns and Walker 1991). In practice, earnings capitalization (EC) model and other historical earnings based models are most common. Carland and White (1980, 43) suggest that the discounted cash flow method ... is infrequently used, as it superficially appears to be a difficult procedure to perform, referring to complexity of calculations. Pratt also notes infrequency of use of DCF method, but suggests that problem is not just complexity of calculations, but rather speculative nature of projections necessary to employ DCF (1986). The use of historical earnings EC model does not really eliminate uncertainty of future, it simply uses prior earnings as a predictor of future performance. Proponents of EC method argue that where historical earnings are good predictors of future earnings, two methods are approximately same. Pratt (1989, 43) states that in general ... approaches using historical data, if properly carried out, should yield a result that is reasonably reconcilable with what a well-implemented discounted future returns approach would derive. This article challenges validity of contention that two methods are approximately same, even when historical earnings are good predictors of future earnings. In addition, a refinement of EC model that will improve its theoretical validity without requiring any additional projections is proposed. The refinement introduced this article should yield better estimates of firm value. There is general agreement that there is substantial room for improvement (LeClair 1990 and Boatsman and Baskin 1981). The next section compares economic flows that are assumed to give rise to value under DCF model and EC model. The third section focuses on role of depreciation and capital expenditure under two methods a non-inflationary setting, while fourth section explores effects of inflation. Finally, fifth section summarizes findings. COMPARISON OF AMOUNTS CAPITALIZED UNDER DCF AND EC Lloyd and Hand (1982) state that appropriate amount to be capitalized under DCF model is: (1) CF = E + D - CAP + dWC + dLTD, where CF is annual cash flow measure, E is annual net income,(1) D is annual depreciation charge, CAP is gross annual capital expenditures, dWC is annual change working capital, and dLTD is annual change long-term debt. It should be noted that amounts required for calculating CF for any prior period are quite easy to obtain from financial records. However, DCF model deals with future cash flows, which are not available. Consequently they must be forecasted some way. The amount that is capitalized under EC model is just E. This assumes that E (the historical earning) is a good predictor of future earnings. Let us examine differences between these two measures when E is a reasonable predictor of future earnings. If E is not a reasonable predictor, then EC is inappropriate (Pratt 1989). The DCF model allows each period's cash flow to differ from other periods. EC implicitly assumes that earnings are same each future period. …