Enterprise value portfolio selection methodology using simulation

Abstract

In this study, the ‘Value Score Method’ is proposed to evaluate the corporate value portfolio by using values that affect corporate value. Using a simulation analysis, this paper considers the results of six scenarios consisting of various selection criteria (5, 7, 10, 11, 12, 13 point). The performance measurements are the number of selected companies and the ‘rate of return.’ The results indicate that scenario 2 consisting of the 7-point value score displayed the highest rate of return but was identified as having significant difficulty in real world application because many management companies are faced with the problem of specific companies generating this rate of return. Thus, the scenario 3consiting 10 point value is the most realistic scenario and the good rate of return in the model. In addition, scenario 7 was set as the combination of scenario 1 consisting of the 5-point value in the down market and scenario 2 consisting of the 7-point value in the up market. Scenario 7 applied to the intersection of the reference point showed a higher cumulative return of 5,276.2% as compared with scenario 2 with an average of 190.4 companies selected.