Study on flaws and improvement of discounted cash flow theory in mergers and acquisitions

The result of value appraisal decides whether an enterprise acquires target or not. Discounted cash flow is a theoretical, widely applied method of value appraisal. However, there are flaws of the theory in predicting cash flow by linear model, static appraisal and ignoring integration cost. This paper tries to amend the flaws in predicting cash flow by genetic neural network, combining games and discounted cash flow method, considering integration cost. The amendment optimizes discounted cash flow method, increases the practicability and science of the method. The improvement of model is available to reduce the risk of value appraisal and complete integration successfully.