Valuation of Start-Up Company Using Real and Financial Assets Rate of Return

Loebiantoro Ika Yanuarti () and Listiawan Jeunifer Nia ()
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Loebiantoro Ika Yanuarti: Universitas Multimedia Nusantara, Indonesia
Listiawan Jeunifer Nia: Universitas Multimedia Nusantara, Indonesia

HOLISTICA – Journal of Business and Public Administration, 2020, vol. 11, issue 3, 120-132

Abstract: The objective of this research is to analyse and describe the valuation of start-up company using the Discounted Cash Flow Analysis. There are several combination of discount rates, including combination of beta, risk free rate and market return. There are several market returns applied in the calculation of the discount rate, such as gold price, crude oil, property price index and IDX composite. The object of research is PT. XYZ, which is a start-up company engaged in the field of software (System & Mobile Application). The results showed that PT. XYZ is a start-up that has a systematic risk (Beta) of 5.1 point, which is lower than the average beta of hi-tech start-up companies. The fair value of PT. XYZ is Rp 3,729,416,128,911. Using a confidence level of 95%, the deviation of company’s value is between Rp102,726,286,407 and Rp7,356,105,971,415. It is concluded that valuing the start-up using real and financial asset return as a benchmark will provide high fair value. The reason is the return in those assets are lower because of lower risk. The lower rate of return will make the value of the start-up company higher. Therefore, investors will request the start-up company to provide higher value.

Keywords: Discounted Cash Flow; Market Return; Systematic Risk (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:hjobpa:v:11:y:2020:i:3:p:120-132:n:8

DOI: 10.2478/hjbpa-2020-0035

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