Specificity of the discount rate application for agricultural business valuation

Yuliia Sivitska

Ekonomika, Journal for Economic Theory and Practice and Social Issues, 2019, vol. 26, issue 12

Abstract: The purpose of the article is to determine which method of beta coefficient calculation for agricultural companies gives the most correct result. The article also describes the peculiarities, problematic issues and ways of their solution that arise during the calculation of an agricultural company discount rate in the process of business valuation. Research methods. The study was conducted on the example of agricultural holdings IMC S.A. and Astarta Holding N.V., listed on the Warsaw Stock Exchange (WSE). The beta coefficients of agroholdings were calculated by various methods and the data used to determine the value of the agricultural business by an income methodological approach, a discounted cash flow method. Research results. The necessity of calculating company beta instead of using pre-calculated industry beta coefficients of agricultural company from different sources in business valuation for the investment purpose has been proved. The obtained results indicate that methodology, which substantiated in the article provides a value of one company's share as close as possible to its current quotation on the Warsaw Stock Exchange. Elements of scientific novelty. The statement that the use of pre-calculated beta coefficients leads in distorting the result of business valuation was further developed. This article provides a rationale for calculating all the components of the Build-up method modified formula to calculate the discount rate of agricultural companies in the process of business valuation for investment purposes for the first time. Practical significance. The results of this research will be useful for valuation specialists (professional appraisers) during the calculation of the discount rate for agricultural business valuation for investment purposes. Tabl.: 8. Figs.: 8. Refs.: 25.

Keywords: Financial; Economics (search for similar items in EconPapers)
Date: 2019
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