Further Exploration on the Choice of Capital Structure in Enterprise Market Valuation Based on Free Cash Flow for the Firm——According to the Issuance of a Decision on Administrative Supervision Measures
Prior to December 30,2020,the weighted average loan interest rate of the target company was commonly used as the cost of debt for interest payments in public valuation projects.With the introduction of Advice from Experts on Asset Valuation Operations No.12-Calculation of Discount Rates in the Income Approach for Enterprise Valuation,an growing number of appraisers have shifted their focus away from the difference between the target company's borrowing rate and the Loan Prime Rate(LPR),and opted to directly use the LPR as the cost of debt for interest payments.This new trend has drawn regulatory attention,and certain projects have received Decision on Administrative Regulatory Measures.Obviously,this issue relates to the choice of capital structure in enterprise market valuation and warrants further exploration.
capital costit own capital structureaverage capital structure
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