CORPORATE VALUATION USING TWO-DIMENSIONAL MONTE CARLO SIMULATION

Abstract

In this paper, we have presented a corporate valuation model. The model combine several valuation methods in order to get more accurate results. To determine the corporate asset value we have used the Gordon-like two-stage asset valuation model based on the calculation of the free cash flow to the firm. We have used the free cash flow to the firm to determine the corporate market value, which was calculated with use of the Black-Scholes option pricing model in frame of the two-dimensional Monte Carlo simulation method. The combined model and the use of the two-dimensional simulation model provides a better opportunity for the corporate value estimation.

Keywords

• corporate valuation
• free cash flow to the firm
• real options
• Black-Scholes option pricing model
• two-dimensional Monte Carlo simulation
• R statistics