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However, in reality it is difficult to calculate values based on a time horizon of perpetuity. Equation (2.1) also does not take into account the cash growth every year (Nogueira Reis & Augusto, 2013). Thus, terminal value is introduced to simplify the calculation process. A common way to estimated terminal value is by incorporating Gordon Growth Model (GGM) β terminal value is given by dividing the multiplication of final year cash flow and long-term cash growth rate by the difference between risk-free rate and long-term growth rate of cash (Folger, 2018; Jennergren, 2008). This is shown in equation (2.2). (2.2) Where TV denotes terminal value, t denotes the terminal year of the time period considered, g denotes long term growth rate for cash. ππ=πΆπΉ β(1+π) π‘ π=βπ+ π‘π βπ π πΆπΉ ππ (1+π )π (1+π )π‘ (2.3) π=1 π π Note that with TV being considered, n in equation (2.3) still denotes time period, but instead of one to infinity as in equation (2.1), it denotes time period from one to the terminal year (1 to t). The DCF method is built on the assumption that the company is able to generate stable economic benefits in the future in the form of cash flow (Beqiraj & Davis, 2016; Dannible & McKee LLP, 2019). In our case, Douyin is a rather young company with only 7 years of history and its business model is yet to be proven profitable β it does not possess positive cash flows necessary for DCF calculation. Looking ahead, its future cash flow is subject to many factors that are macro-economic, political, industry-specific, and corporate, we therefore donβt think DCF is a suitable method for valuing Douyin. 2.1.2 Asset-based approach - 15 -PDF Image | Analysis of ByteDance with a close look on Douyin TikTok
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