Corporate valuation of the ThyssenKrupp AG. Estimating the economic value using the DCF Method (WACC), DCF Method (Equity) and Multiples Method

Abstract or Introduction

The purpose of this paper has been to document and discuss the value of ThyssenKrupp AG corporate according to figures from the annual report of the fiscal year 2014/2015 and popular financial websites using three methods DCF Method (WACC), DCF Method (Equity) and Multiples Method to come out with a fair value of the company. This value represents the price at which the holders of the company can sell or the buyers can buy it.

The valuation results will be compared to the Peer Group Companies in order to figure out whether the Company is overvalued or undervalued. This paper also discusses the Advantages and the Disadvantages of each method where one method is not sufficient to give a fair value of the company.

Business valuation is a process aimed at estimating the fair economic value of a business by analysts or investors to determine the price at which the owner can sell or the investors can buy a specific business. Valuation is also used to determine the share´s value by the investors in order to decide whether to buy or sell, to take strategic decisions by the owners regarding existence of a business to sell, merge, milk or buy another business, and to measure the company´s policies and strategies impact on value creation and destruction.

The complication in valuing a business comes from the variety of methods such as DCF Method (WACC), DCF Method (Equity) and which are not created equal and thus, they come out with different values which measure different components of capital structure. DCF methods are based of forecasting date for years forward and that requires lots of predictions and assumptions of the business performance in the future so that any change will lead to different company´s value.

But in the other side, DCF methods are the most important and powerful used by professionals and investors over the world and employed for a wide range of tasks. While the Multiples are based on the comparison with other similar companies in order to determine whether the company or the share overvalued or undervalued.