公司理财(双语)npv

,WhyNetPresentValueLeadstoBetterInvestmentDecisionsthanOtherCriteria,CorporateFinance,Chapter9,McGrawHill/Irwin,TopicsCovered,NPVanditsCompetitorsThePaybackPeriodTheAverageAccountingReturnInternalRateofReturnCapitalRationing,CFODecisionTools,SurveyDataonCFOUseofInvestmentEvaluationTechniques,SOURCE:GrahamandHarvey,“TheTheoryandPracticeofFinance:EvidencefromtheField,”JournalofFinancialEconomics61(2001),pp.187-243.,GoodDecisionCriteria,Weneedtoaskourselvesthefollowingquestionswhenevaluatingcapitalbudgetingdecisionrules:Doesthedecisionruleadjustforthetimevalueofmoney?Doesthedecisionruleadjustforrisk?Doesthedecisionruleprovideinformationonwhetherwearecreatingvalueforthefirm?,9-4,NetPresentValue,Thedifferencebetweenthemarketvalueofaprojectanditscost.NetPresentValue(NPV)=InitialInvestment+TotalPVoffutureCFs,9-5,NPVDecisionRule,EstimatingNPV:1.Estimatefuturecashflows:howmuch?andwhen?2.Estimatediscountrate3.Estimateinitialcosts,NPVDecisionRule,IftheNPVispositive,accepttheprojectApositiveNPVmeansthattheprojectisexpectedtoaddvaluetothefirmandwillthereforeincreasethewealthoftheowners.Sinceourgoalistoincreaseownerwealth,NPVisadirectmeasureofhowwellthisprojectwillmeetourgoal.,9-7,NPVDecisionRule,MinimumAcceptanceCriteria:AcceptifNPV0RankingCriteria:ChoosethehighestNPVExample9.1seepage263,Payback,Thepaybackperiodofaprojectisthenumberofyearsittakesbeforethecumulativeforecastedcashflowequalstheinitialoutlay.Thepaybackrulesaysonlyacceptprojectsthat“payback”inthedesiredtimeframe.Thismethodisveryflawed,primarilybecauseitignoreslateryearcashflowsandthethepresentvalueoffuturecashflows.,Payback,ExampleExaminethethreeprojectsandnotethemistakewewouldmakeifweinsistedononlytakingprojectswithapaybackperiodof2yearsorless.,Payback,ExampleExaminethethreeprojectsandnotethemistakewewouldmakeifweinsistedononlytakingprojectswithapaybackperiodof2yearsorless.,DecisionCriteriaTest-Payback,Doesthepaybackruleaccountforthetimevalueofmoney?Doesthepaybackruleaccountfortheriskofthecashflows?Doesthepaybackruleprovideanindicationabouttheincreaseinvalue?Shouldweconsiderthepaybackruleforourprimarydecisionrule?,9-12,AdvantagesandDisadvantagesofPayback,AdvantagesEasytounderstandAdjustsforuncertaintyoflatercashflowsBiasedtowardliquidity,DisadvantagesIgnoresthetimevalueofmoneyRequiresanarbitrarycutoffpointIgnorescashflowsbeyondthecutoffdateBiasedagainstlong-termprojects,suchasresearchanddevelopment,andnewprojects,9-13,DiscountedPaybackPeriod,ComputethepresentvalueofeachcashflowandthendeterminehowlongittakestopaybackonadiscountedbasisComparetoaspecifiedrequiredperiodDecisionRule-Accepttheprojectifitpaysbackonadiscountedbasiswithinthespecifiedtime,9-14,ComputingDiscountedPaybackfortheProject,Assumewewillaccepttheprojectifitpaysbackonadiscountedbasisin2years.ComputethePVforeachcashflowanddeterminethepaybackperiodusingdiscountedcashflowsYear1:165,00063,120/1.121=108,643Year2:108,64370,800/1.122=52,202Year3:52,20291,080/1.123=-12,627projectpaysbackinyear3Doweacceptorrejecttheproject?,9-15,AdvantagesandDisadvantagesofDiscountedPayback,AdvantagesIncludestimevalueofmoneyEasytounderstandDoesnotacceptnegativeestimatedNPVinvestmentswhenallfuturecashflowsarepositiveBiasedtowardsliquidity,DisadvantagesMayrejectpositiveNPVinvestmentsRequiresanarbitrarycutoffpointIgnorescashflowsbeyondthecutoffpointBiasedagainstlong-termprojects,suchasRtimevalueofmoneyisignoredUsesanarbitrarybenchmarkcutoffrateBasedonaccountingnetincomeandbookvalues,notcashflowsandmarketvalues,9-20,IRRDefinitionandDecisionRule,Definition:IRRisthereturnthatmakestheNPV=0DecisionRule:AccepttheprojectiftheIRRisgreaterthantherequiredreturn,9-21,InternalRateofReturn,ExampleYoucanpurchaseaturbopoweredmachinetoolgadgetfor$4,000.Theinvestmentwillgenerate$2,000and$4,000incashflowsfortwoyears,respectively.WhatistheIRRonthisinvestment?,InternalRateofReturn,ExampleYoucanpurchaseaturbopoweredmachinetoolgadgetfor$4,000.Theinvestmentwillgenerate$2,000and$4,000incashflowsfortwoyears,respectively.WhatistheIRRonthisinvestment?,InternalRateofReturn,ExampleYoucanpurchaseaturbopoweredmachinetoolgadgetfor$4,000.Theinvestmentwillgenerate$2,000and$4,000incashflowsfortwoyears,respectively.WhatistheIRRonthisinvestment?,InternalRateofReturn,IRR=28%,DecisionCriteriaTest-IRR,DoestheIRRruleaccountforthetimevalueofmoney?DoestheIRRruleaccountfortheriskofthecashflows?DoestheIRRruleprovideanindicationabouttheincreaseinvalue?ShouldweconsidertheIRRruleforourprimarydecisioncriteria?,9-26,SummaryofDecisionsfortheProject,9-27,NPVvs.IRR,NPVandIRRwillgenerallygiveusthesamedecisionExceptionsNonconventionalcashflowscashflowsignschangemorethanonceMutuallyexclusiveprojectsInitialinvestmentsaresubstantiallydifferent(issueofscale)Timingofcashflowsissubstantiallydifferent,9-28,InternalRateofReturn,Pitfall1-LendingorBorrowing?Withsomecashflows(asnotedbelow)theNPVoftheprojectincreasessthediscountrateincreases.ThisiscontrarytothenormalrelationshipbetweenNPVanddiscountrates.,InternalRateofReturn,Pitfall1-LendingorBorrowing?Withsomecashflows(asnotedbelow)theNPVoftheprojectincreasessthediscountrateincreases.ThisiscontrarytothenormalrelationshipbetweenNPVanddiscountrates.,DiscountRate,NPV,InternalRateofReturn,Pitfall2-MultipleRatesofReturnCertaincashflowscangenerateNPV=0attwodifferentdiscountrates.ThefollowingcashflowgeneratesNPV=$A3.3millionatbothIRR%of(-44%)and+11.6%.,CashFlows(millionsofAustraliandollars),InternalRateofReturn,Pitfall2-MultipleRatesofReturnCertaincashflowscangenerateNPV=0attwodifferentdiscountrates.ThefollowingcashflowgeneratesNPV=0atboth(-50%)and15.2%.,1000,NPV,500,0,-500,-1000,DiscountRate,IRR=15.2%,IRR=-50%,IRRandMutuallyExclusiveProjects,MutuallyexclusiveprojectsIfyouchooseone,youcantchoosetheotherExample:YoucanchoosetoattendgraduateschoolateitherHarvardorStanford,butnotbothIntuitively,youwouldusethefollowingdecisionrules:NPVchoosetheprojectwiththehigherNPVIRRchoosetheprojectwiththehigherIRR,9-33,ExampleWithMutuallyExclusiveProjects,Therequiredreturnforbothprojectsis10%.Whichprojectshouldyouacceptandwhy?,9-34,NPVProfiles,IRRforA=19.43%IRRforB=22.17%CrossoverPoint=11.8%,9-35,ConflictsBetweenNPVandIRR,NPVdirectlymeasurestheincreaseinvaluetothefirmWheneverthereisaconflictbetweenNPVandanotherdecisionrule,youshouldalwaysuseNPVIRRisunreliableinthefollowingsituationsNonconventionalcashflowsMutuallyexclusiveprojects,9-36,AdvantagesandDisadvantagesofinternalrateofreturn,AdvantagesCloselyrelatedtoNPV,generallyleadingtoidenticaldecisionsEasytounderstandandcommunicate,DisadvantagesMayleadtoincorrectdecisionsincomparisonsofmutuallyexclusiveinvestmentsMayresultinmultipleanswersornotdealwithnonconventionalcashflows.,9-37,ProfitabilityIndex,Whenresourcesarelimited,theprofitabilityindex(PI)providesatoolforselectingamongvariousprojectcombinationsandalternativesAsetoflimitedresourcesandprojectscanyieldvariouscombinations.ThehighestweightedaveragePIcanindicatewhichprojectstoselect.,ProfitabilityIndex,ExampleWeonlyhave$300,000toinvest.Whichdoweselect?ProjNPVInvestmentPIA230,000200,0001.15B141,250125,0001.13C194,250175,0001.11D162,000150,0001.08,ProfitabilityIndex,Example-continuedProjNPVInvestmentPIA230,000200,0001.15B141,250125,0001.13C194,250175,0001.11D162,000150,0001.08SelectprojectswithhighestWeightedAvgPIWAPI(BD)=1.13(125)+1.08(150)+0.0(25)(300)(300)(300)=1.01,ProfitabilityIndex,Example-continuedProjNPVInvestmentPIA230,000200,0001.15B141,250125,0001.13C194,250175,0001.11D162,000150,0001.08SelectprojectswithhighestWeightedAvgPIWAPI(BD)=1.01WAPI(A)=0.77WAPI(BC)=1.12,AdvantagesandDisadvantagesofProfitabilityIndex,AdvantagesCloselyrelatedtoNPV,generallyleadingtoidenticaldecisionsEasytounderstandandcommunicateMaybeusefulwhenavailableinvestmentfundsarelimited,DisadvantagesMayleadtoincorrectdecisionsincomparisonsofmutuallyexclusiveinvestments,9-42,SummaryDCFCriteria,NetpresentvalueDifferencebetweenmarketvalueandcostTaketheprojectiftheNPVispositiveHasnoseriousproblemsPreferreddecisioncriterionInternalrateofreturnDiscountratethatmakesNPV=0TaketheprojectiftheIRRi