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Corporate Valuation Using Two-Dimensional Monte Carlo Simulation

Author

Listed:
  • Tarnóczi Tibor

    (University of Debrecen, Faculty of Applied Economics and Rural Development)

  • Fenyves Veronika

    (University of Debrecen, Faculty of Applied Economics and Rural Development)

  • Tóth Réka

    (University of Debrecen, Faculty of Applied Economics and Rural Development)

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.

Suggested Citation

  • Tarnóczi Tibor & Fenyves Veronika & Tóth Réka, 2010. "Corporate Valuation Using Two-Dimensional Monte Carlo Simulation," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 788-794, December.
    • Handle: RePEc:ora:journl:v:1:y:2010:i:2:p:788-794
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    More about this item

    Keywords

    corporate valuation; free cash flow to the firm; real options; Black-Scholes option pricing model; two-dimensional Monte Carlo simulation; R statistics;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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