| dc.description.abstract | This study explores a case of a small and medium-sized trade company transitioning into a manufacturer, using the Net Present Value （NPV） method through Discounted Cash Flow （DCF） to evaluate the company’s enterprise value. By conducting sensitivity analysis under four different scenarios, it compares the enterprise values to provide references for the case company’s pursuit of diversification transformation strategies.
This study collected and processed data from the Case of Company P over the past five years, referencing its financial statements and operational strategies to project and compile the company′s operational growth indicators and cash flow statements for the next twelve years, using a reasonable estimate of the weighted average cost of capital for discounting. Company P, as analyzed in this study, is indeed a company with significant potential. Its 2021 revenue exceeded NT$500 million, far surpassing the NT$80 million average reported for small and medium-sized enterprises in 2021. The comprehensive assessment conducted in this study indicates that if the company fails to continue improving and making progress, the rapid expansion in trade footprint and market share could lead to increased defect rates and delays in delivery due to the incapability of manufacturing plants to scale up concurrently. This could result in the company′s growth being negatively impacted. Therefore, diversification is considered a necessary strategy for the case company to maintain competitiveness and achieve sustainable development.
To address this issue, the Company P established a subsidiary C by acquireing an upstream manufacturer. This study assumes the company will continue to develop sustainably, using the DCF method to evaluate enterprise value and sensitivity analysis to assess investment effectiveness. The results show that, even in the most optimistic scenario, the standalone NPV of investing in the subsidiary is still negative （-14,844 thousand NTD）. However, after the merger, even in the most pessimistic scenario, investing in subsidiary C positively impacts the overall value of P company （post-merger）. That is, the NPV of P company increases from 470,752 thousand NTD before the merger to 717,281 thousand NTD after the merger, representing at least a 52% increase in enterprise value. | en_US |