公司理财Chap7课件.ppt

Chapter7NetPresentValueandOtherInvestmentRules 1 KeyConceptsandSkills BeabletocomputepaybackanddiscountedpaybackandunderstandtheirshortcomingsUnderstandaccountingratesofreturnandtheirshortcomingsBeabletocomputetheinternalrateofreturnandprofitabilityindex understandingthestrengthsandweaknessesofbothapproachesBeabletocomputethenetpresentvalueandunderstandwhyitisthebestdecisioncriterion 2 PPT交流学习 ChapterOutline 7 1WhyUseNetPresentValue 7 2ThePaybackPeriodMethod7 3TheDiscountedPaybackPeriodMethod7 4TheAverageAccountingReturnMethod7 5TheInternalRateofReturn7 6TheProfitabilityIndex7 7ThePracticeofCapitalBudgeting 3 PPT交流学习 7 1WhyUseNetPresentValue AcceptingpositiveNPVprojectsbenefitsshareholders NPVusescashflowsNPVusesallthecashflowsoftheprojectNPVdiscountsthecashflowsproperlyReinvestmentassumption theNPVruleassumesthatallcashflowscanbereinvestedatthediscountrate 4 PPT交流学习 TheNetPresentValue NPV Rule NetPresentValue NPV TotalPVoffutureCFs InitialInvestmentEstimatingNPV 1 Estimatefuturecashflows howmuch andwhen 2 Estimatediscountrate3 EstimateinitialcostsMinimumAcceptanceCriteria AcceptifNPV 0RankingCriteria ChoosethehighestNPV 5 PPT交流学习 Considerthefollowingthreeprojectsavailabletoafirm Theappropriatediscountratefortheprojectsis10 PleasecalculatetheNPVforeachproject Example 6 PPT交流学习 7 PPT交流学习 7 2ThePaybackPeriodMethod Howlongdoesittaketheprojectto payback itsinitialinvestment PaybackPeriod numberofyearstorecoverinitialcostsMinimumAcceptanceCriteria SetbymanagementRankingCriteria Setbymanagement 8 PPT交流学习 Considerthefollowingthreeprojectsavailabletoafirm Pleasecalculatethepaybackperiodforeachproject Example 9 PPT交流学习 10 PPT交流学习 Disadvantages IgnoresthetimevalueofmoneyIgnorescashflowsafterthepaybackperiodBiasedagainstlong termprojectsRequiresarbitraryacceptancecriteriaAprojectacceptedbasedonthepaybackcriteriamaynothaveapositiveNPVAdvantages EasytounderstandBiasedtowardliquidity 11 PPT交流学习 Example 12 PPT交流学习 7 3TheDiscountedPaybackPeriod Howlongdoesittaketheprojectto payback itsinitialinvestment takingthetimevalueofmoneyintoaccount Decisionrule Accepttheprojectifitpaysbackonadiscountedbasiswithinthespecifiedtime 13 PPT交流学习 PP 1 1 2yeardiscountthecashfollow 100 00045 454 5541 322 3115 026 3 DPP 1 1 100000 45454 55 41322 31 15026 3 2 0 88 2 88year Example discountrate 10 14 PPT交流学习 Example discountrate 10 PPA 1 62 PPB 2 3 PPC 2 61 15 PPT交流学习 7 4AverageAccountingReturn Anotherattractive butfatallyflawed approachRankingCriteriaandMinimumAcceptanceCriteria Setbymanagement 16 PPT交流学习 Considerthefollowingthreeprojectsavailabletoafirm Pleasecalculatetheaverageaccountingreturnforeachproject Example 17 PPT交流学习 18 PPT交流学习 Disadvantages IgnoresthetimevalueofmoneyUsesanarbitrarybenchmarkcutoffrateBasedonbookvalues notcashflowsandmarketvaluesAdvantages TheaccountinginformationisusuallyavailableEasytocalculate 19 PPT交流学习 7 5TheInternalRateofReturn IRR thediscountratethatsetsNPVtozeroMinimumAcceptanceCriteria AcceptiftheIRRexceedstherequiredreturnRankingCriteria SelectalternativewiththehighestIRRReinvestmentassumption AllfuturecashflowsassumedreinvestedattheIRR 20 PPT交流学习 Example Considerthefollowingproject Theinternalrateofreturnforthisprojectisabout19 44 21 PPT交流学习 IfwegraphNPVversusthediscountrate wecanseetheIRRasthex axisintercept 22 PPT交流学习 Considerthefollowingthreeprojectsavailabletoafirm Pleasecalculatetheinternalrateofreturnforeachproject Example 23 PPT交流学习 24 PPT交流学习 ProblemswithIRR InvestingorFinancing MultipleIRRsTheScaleProblemTheTimingProblem IndependentandMutuallyExclusiveProjects 25 PPT交流学习 MutuallyExclusivevs Independent MutuallyExclusiveProjects onlyONEofseveralpotentialprojectscanbechosenRANKallalternatives andselectthebestone IndependentProjects acceptingorrejectingoneprojectdoesnotaffectthedecisionoftheotherprojectsMustexceedaMINIMUMacceptancecriteria 26 PPT交流学习 TwoGeneralProblemsAffectingBothIndependentandMutuallyExclusiveProjects Problem1 InvestingorFinancing 27 PPT交流学习 TheNPVofprojectAisnegativelyrelatedtothediscountrate TheNPVofprojectBispositivelyrelatedtothediscountrate Projectswithmorethanonechangeofsigncanhavemultipleratesofreturn Someconclusionsoftheexample 28 PPT交流学习 InvestingprojectsAcceptifIRRismorethanmarket discount rateRejectifIRRislessthanmarket discount rateFinancingprojectsAcceptifIRRislessthanmarket discount rateRejectifIRRismorethanmarket discount rateMixtureprojectsCanhavemultipleIRRsShoulduseNPVruleorMIRRmethod 29 PPT交流学习 ModifiedIRR Calculatethenetpresentvalueofallcashoutflowsusingthegivendiscountrate Calculatethenetfuturevalueofallcashinflowsusingthegivendiscountrate Findtherateofreturnthatequatesthesevalues MIRRassumescashinflowsarereinvestedatWACCBenefits singleanswerandspecificratesforborrowingandreinvestment Problem2 MultipleIRRs 30 PPT交流学习 Example r 10 81 96 330 00 484 00 665 50 1 081 96 PVofallthecostsoftheproject discountedatthecostofcapital FVofalltheprojectsincome reinvestedatthecostofcapital TerminalValue 1 497 50 31 PPT交流学习 ProblemsSpecifictoMutuallyExclusiveProjects Wouldyourathermake100 or50 onyourinvestments Whatifthe100 returnisona 1investment whilethe50 returnisona 1 000investment Problem3 TheScaleProblem 32 PPT交流学习 Problem4 TheTimingProblem 33 PPT交流学习 34 PPT交流学习 Someconclusionsoftheexample Wecanselectthebetterprojectwithoneofthethreedifferentmethods CompareNPVsoftheTwoProjectsCompareIncrementalIRRtoDiscountRateCalculateNPVonIncrementalCashFlows 35 PPT交流学习 NPVversusIRR NPVandIRRwillgenerallygivethesamedecision Exceptions Non conventionalcashflows cashflowsignschangemorethanonceMutuallyexclusiveprojectsInitialinvestmentsaresubstantiallydifferentTimingofcashflowsissubstantiallydifferent 36 PPT交流学习 ATest YoumustknowthediscountratetocomputetheNPVofaproject butyoucomputetheIRRwithoutreferringtothediscountrate Hence theIRRruleiseasiertoapplythantheNPVrulebecauseyoudon tusethediscountratewhenapplyingIRR 37 PPT交流学习 7 6TheProfitabilityIndex PI MinimumAcceptanceCriteria AcceptifPI 1RankingCriteria SelectalternativewithhighestPI 38 PPT交流学习 Considerthefollowingthreeprojectsavailabletoafirm Pleasecalculatetheprofitabilityindexforeachproject NPVA 1669 NPVB 1557 NPVc 560 Example 39 PPT交流学习 40 PPT交流学习 Disadvantages ProblemswithmutuallyexclusiveinvestmentsAdvantages MaybeusefulwhenavailableinvestmentfundsarelimitedEasytounderstandandcommunicateCorrectdecisionwhenevaluatingindependentprojects 41 PPT交流学习 7 7ThePracticeofCapitalBudgeting Variesbyindustry Somefirmsusepayback othersuseaccountingrateofreturn ThemostfrequentlyusedtechniqueforlargecorporationsisIRRorNPV 42 PPT交流学习 Summary DiscountedCashFlow NetpresentvalueDifferencebetweenmarketvalueandcostAccepttheprojectiftheNPVispositiveHasnoseriousproblemsPreferreddecisioncriterionInternalrateofreturnDiscountratethatmakesNPV 0TaketheprojectiftheIRRisgreaterthantherequiredreturnSamedecisionasNPVwithconventionalcashflowsIRRisunreliablewithnon conventionalcashflowsormutuallyexclusiveprojectsProfitabilityIndexBenefit costratioT