公司理财Chap07课件.ppt

NetPresentValueandOtherInvestmentRules Chapter7 McGraw Hill IrwinCopyright 2009byTheMcGraw HillCompanies Inc Allrightsreserved 0 PPT学习交流 KeyConceptsandSkills BeabletocomputepaybackanddiscountedpaybackandunderstandtheirshortcomingsUnderstandaccountingratesofreturnandtheirshortcomingsBeabletocomputetheinternalrateofreturnandprofitabilityindex understandingthestrengthsandweaknessesofbothapproachesBeabletocomputethenetpresentvalueandunderstandwhyitisthebestdecisioncriterion 1 PPT学习交流 ChapterOutline 7 1WhyUseNetPresentValue 7 2ThePaybackPeriodMethod7 3TheDiscountedPaybackPeriodMethod7 4TheAverageAccountingReturnMethod7 5TheInternalRateofReturn7 6ProblemswiththeIRRApproach7 7TheProfitabilityIndex7 8ThePracticeofCapitalBudgeting 2 PPT学习交流 7 1WhyUseNetPresentValue AcceptingpositiveNPVprojectsbenefitsshareholders NPVusescashflowsNPVusesallthecashflowsoftheprojectNPVdiscountsthecashflowsproperlyReinvestmentassumption theNPVruleassumesthatallcashflowscanbereinvestedatthediscountrate 3 PPT学习交流 TheNetPresentValue NPV Rule NetPresentValue NPV TotalPVoffutureCF s InitialInvestmentEstimatingNPV 1 Estimatefuturecashflows howmuch andwhen 2 Estimatediscountrate3 EstimateinitialcostsMinimumAcceptanceCriteria AcceptifNPV 0RankingCriteria ChoosethehighestNPV 4 PPT学习交流 CalculatingNPVwithSpreadsheets SpreadsheetsareanexcellentwaytocomputeNPVs especiallywhenyouhavetocomputethecashflowsaswell UsingtheNPVfunction Thefirstcomponentistherequiredreturnenteredasadecimal Thesecondcomponentistherangeofcashflowsbeginningwithyear1 AddtheinitialinvestmentaftercomputingtheNPV 5 PPT学习交流 7 2ThePaybackPeriodMethod 6 PPT学习交流 7 2ThePaybackPeriodMethod Howlongdoesittaketheprojectto payback itsinitialinvestment PaybackPeriod numberofyearstorecoverinitialcostsMinimumAcceptanceCriteria SetbymanagementRankingCriteria Setbymanagement 7 PPT学习交流 7 2ThePaybackPeriodMethod 8 PPT学习交流 7 2ThePaybackPeriodMethod c 10K22K37K47K54K PBP a b c d 3 40 37 10 3 3 10 3 3Years accumulativecashflow a b d 012345 9 PPT学习交流 ThePaybackPeriodMethod Disadvantages IgnoresthetimevalueofmoneyIgnorescashflowsafterthepaybackperiodBiasedagainstlong termprojectsRequiresanarbitraryacceptancecriteriaAprojectacceptedbasedonthepaybackcriteriamaynothaveapositiveNPVAdvantages EasytounderstandBiasedtowardliquidity 10 PPT学习交流 7 3TheDiscountedPaybackPeriod Howlongdoesittaketheprojectto payback itsinitialinvestment takingthetimevalueofmoneyintoaccount Decisionrule Accepttheprojectifitpaysbackonadiscountedbasiswithinthespecifiedtime Bythetimeyouhavediscountedthecashflows youmightaswellcalculatetheNPV 11 PPT学习交流 7 4AverageAccountingReturn Anotherattractive butfatallyflawed approachRankingCriteriaandMinimumAcceptanceCriteriasetbymanagement 12 PPT学习交流 7 4AverageAccountingReturn 13 PPT学习交流 AverageAccountingReturn Disadvantages IgnoresthetimevalueofmoneyUsesanarbitrarybenchmarkcutoffrateBasedonbookvalues notcashflowsandmarketvaluesAdvantages TheaccountinginformationisusuallyavailableEasytocalculate 14 PPT学习交流 7 5TheInternalRateofReturn IRR thediscountratethatsetsNPVtozeroMinimumAcceptanceCriteria AcceptiftheIRRexceedstherequiredreturnRankingCriteria SelectalternativewiththehighestIRRReinvestmentassumption AllfuturecashflowsassumedreinvestedattheIRR 15 PPT学习交流 InternalRateofReturn IRR i1i实i2DiscountedRate NPV10NPV2 i计 NPV 16 PPT学习交流 InternalRateofReturn IRR 17 PPT学习交流 InternalRateofReturn IRR Disadvantages DoesnotdistinguishbetweeninvestingandborrowingIRRmaynotexist ortheremaybemultipleIRRsProblemswithmutuallyexclusiveinvestmentsAdvantages Easytounderstandandcommunicate 18 PPT学习交流 IRR Example Considerthefollowingproject Theinternalrateofreturnforthisprojectis19 44 19 PPT学习交流 NPVPayoffProfile IfwegraphNPVversusthediscountrate wecanseetheIRRasthex axisintercept 20 PPT学习交流 CalculatingIRRwithSpreadsheets YoustartwiththecashflowsthesameasyoudidfortheNPV YouusetheIRRfunction Youfirstenteryourrangeofcashflows beginningwiththeinitialcashflow Youcanenteraguess butitisnotnecessary Thedefaultformatisawholepercent youwillnormallywanttoincreasethedecimalplacestoatleasttwo 21 PPT学习交流 7 6ProblemswithIRR AreWeBorrowingorLendingMultipleIRRsTheScaleProblemTheTimingProblem 22 PPT学习交流 MutuallyExclusivevs Independent MutuallyExclusiveProjects onlyONEofseveralpotentialprojectscanbechosen e g RANKallalternatives andselectthebestone IndependentProjects acceptingorrejectingoneprojectdoesnotaffectthedecisionoftheotherprojects MustexceedaMINIMUMacceptancecriteria 23 PPT学习交流 AreWeBorrowingorLending 24 PPT学习交流 AreWeBorrowingorLending 25 PPT学习交流 MultipleIRRs TherearetwoIRRsforthisproject Whichoneshouldweuse 26 PPT学习交流 ModifiedIRR Calculatethenetpresentvalueofallcashoutflowsusingtheborrowingrate Calculatethenetfuturevalueofallcashinflowsusingtheinvestingrate Findtherateofreturnthatequatesthesevalues Benefits singleanswerandspecificrates 27 PPT学习交流 TheScaleProblem Wouldyourathermake100 or50 onyourinvestments Whatifthe100 returnisona 1investment whilethe50 returnisona 1 000investment 28 PPT学习交流 TheScaleProblem 29 PPT学习交流 TheScaleProblem 30 PPT学习交流 TheTimingProblem 31 PPT学习交流 TheTimingProblem 32 PPT学习交流 CalculatingtheCrossoverRate ComputetheIRRforeitherproject A B or B A 33 PPT学习交流 IRRGeneralRules 34 PPT学习交流 NPVversusIRR NPVandIRRwillgenerallygivethesamedecision Exceptions Non conventionalcashflows cashflowsignschangemorethanonceMutuallyexclusiveprojectsInitialinvestmentsaresubstantiallydifferentTimingofcashflowsissubstantiallydifferent 35 PPT学习交流 ATest YoumustknowthediscountratetocomputetheNPVofaprojectbutyoucomputetheIRRwithoutreferringtothediscountrate Hence theIRRruleiseasiertoapplythantheNPVrulebecauseyoudonnotusethediscountratewhenapplyingIRR 36 PPT学习交流 7 7TheProfitabilityIndex PI MinimumAcceptanceCriteria AcceptifPI 1RankingCriteria SelectalternativewithhighestPI 37 PPT学习交流 7 7TheProfitabilityIndex PI 38 PPT学习交流 7 7CapitalRationing Initialinvestment20 39 PPT学习交流 TheProfitabilityIndex Disadvantages ProblemswithmutuallyexclusiveinvestmentsAdvantages MaybeusefulwhenavailableinvestmentfundsarelimitedEasytounderstandandcommunicateCorrectdecisionwhenevaluatingindependentprojects 40 PPT学习交流 7 8ThePracticeofCapitalBudgeting Variesbyindustry Somefirmsusepayback othersuseaccountingrateofreturn ThemostfrequentlyusedtechniqueforlargecorporationsisIRRorNPV 41 PPT学习交流 7 8ThePracticeofCapitalBudgeting Thetheoryandpracticeofcorporatefinance Evidencefromthefield JohnR Graham CampbellR Harvey JournalofFinancialEconomics 2001 42 PPT学习交流 7 8ThePracticeofCapitalBudgeting 43 PPT学习交流 ExampleofInvestmentRules ComputetheIRR NPV PI andpaybackperiodforthefollowingtwoprojects Assumetherequiredreturnis10 YearProjectAProjectB0 200 1501 200 502 800 1003 800 150 44 PPT学习交流 ExampleofInvestmentRules ProjectAProjectBCF0 200 00 150 00PV0ofCF1 3 241 92 240 80NPV 41 92 90 80IRR 0 100 36 19 PI 1 20961 6053 45 PPT学习交流 ExampleofInvestmentRules PaybackPeriod ProjectAProjectBTimeCFCum CFCFCum CF0 200 200 150 1501200050 100280080010003 8000150150PaybackperiodforprojectB 2years PaybackperiodforprojectA 1or3years 46 PPT学习交流 NPVandIRRRelationship DiscountrateNPVforANPVforB 10 87 52234 770 0 00150 0020 59 2647 9240 59 48 8 6060 42 19 43 0780 20 85 65 64100 0 00 81 25120 18 93 92 52 47 PPT学习交流 200 100 0 100 200 300 400 15 0 15 30 45 70 100 130 160 190 Discountrates NPV NPVProfiles IRR2 A Cross overRate 48 PPT学习交流 Summary DiscountedCashFlow NetpresentvalueDifferencebetweenmarketvalueandcostAccepttheprojectiftheNPVispositiveHasnoseriousproblemsPreferreddecisioncriterionInternalrateofreturnDiscountratethatmakesNPV 0TaketheprojectiftheIRRisgreaterthantherequiredreturnSamedecisionasNPVwithconventionalcashflowsIRRisunreliablewithnon conventionalcashflowsormutuallyexclusiveprojectsProfitabilityIndexBenefit costratioTakeinvestmentifPI 1CannotbeusedtorankmutuallyexclusiveprojectsMaybeusedtorankprojectsinthepresenceofcapitalrationing 49 PPT学习交流 Summary PaybackCriteria PaybackperiodLengthofti