公司理财规划.ppt

Chapter9 MakingCapitalInvestmentDecisions 0 KeyConceptsandSkills UnderstandhowtodeterminetherelevantcashflowsforaproposedinvestmentUnderstandhowtoanalyzeaproject sprojectedcashflowsUnderstandhowtoevaluateanestimatedNPV 1 ChapterOutline ProjectCashFlows AFirstLookIncrementalCashFlowsProFormaFinancialStatementsandProjectCashFlowsMoreonProjectCashFlowsEvaluatingNPVEstimatesScenarioandOtherWhat IfAnalysesAdditionalConsiderationsinCapitalBudgeting 2 RelevantCashFlows ThecashflowsthatshouldbeincludedinacapitalbudgetinganalysisarethosethatwillonlyoccuriftheprojectisacceptedThesecashflowsarecalledincrementalcashflowsThestand aloneprincipleallowsustoanalyzeeachprojectinisolationfromthefirmsimplybyfocusingonincrementalcashflows 3 AskingtheRightQuestion Youshouldalwaysaskyourself WillthiscashflowchangeONLYifweaccepttheproject Iftheansweris yes itshouldbeincludedintheanalysisbecauseitisincrementalIftheansweris no itshouldnotbeincludedintheanalysisbecauseitisnotaffectedbytheprojectIftheansweris partofit thenweshouldincludethepartthatoccursbecauseoftheproject 4 CommonTypesofCashFlows Sunkcosts coststhathaveaccruedinthepastOpportunitycosts costsoflostoptionsSideeffectsPositivesideeffects benefitstootherprojectsNegativesideeffects coststootherprojectsChangesinnetworkingcapitalFinancingcostsTaxes 5 ProFormaStatementsandCashFlow Capitalbudgetingreliesheavilyonproformaaccountingstatements particularlyincomestatementsComputingcashflows refresherOperatingCashFlow OCF EBIT depreciation taxesOCF Netincome depreciationwhenthereisnointerestexpenseCashFlowFromAssets CFFA OCF netcapitalspending NCS changesinNWC 6 Table9 1ProFormaIncomeStatement 7 Table9 2ProjectedCapitalRequirements 8 Table9 5ProjectedTotalCashFlows 9 MakingTheDecision Nowthatwehavethecashflows wecanapplythetechniquesthatwelearnedinchapter8EnterthecashflowsintothecalculatorandcomputeNPVandIRRCF0 110 000 C01 51 780 F01 2 C02 71 780NPV I 20 CPTNPV 10 648CPTIRR 25 8 Shouldweacceptorrejecttheproject 10 TheTaxShieldApproach YoucanalsofindoperatingcashflowsusingthetaxshieldapproachOCF Sales costs 1 T Depreciation TThisformmaybeparticularlyusefulwhenthemajorincrementalcashflowsarethepurchaseofequipmentandtheassociateddepreciationtaxshield suchaswhenyouarechoosingbetweentwodifferentmachines 11 MoreonNWC WhydowehavetoconsiderchangesinNWCseparately GAAPrequiresthatsalesberecordedontheincomestatementwhenmade notwhencashisreceivedGAAPalsorequiresthatwerecordcostofgoodssoldwhenthecorrespondingsalesaremade whetherwehaveactuallypaidoursuppliersyetFinally wehavetobuyinventorytosupportsalesalthoughwehaven tcollectedcashyet 12 Depreciation ThedepreciationexpenseusedforcapitalbudgetingshouldbethedepreciationschedulerequiredbytheIRSfortaxpurposesDepreciationitselfisanon cashexpense consequently itisonlyrelevantbecauseitaffectstaxesDepreciationtaxshield DTD depreciationexpenseT marginaltaxrate 13 ComputingDepreciation Straight linedepreciationD Initialcost salvage numberofyearsVeryfewassetsaredepreciatedstraight linefortaxpurposesMACRSNeedtoknowwhichassetclassisappropriatefortaxpurposesMultiplypercentagegivenintablebytheinitialcostDepreciatetozeroMid yearconvention 14 After taxSalvage Ifthesalvagevalueisdifferentfromthebookvalueoftheasset thenthereisataxeffectBookvalue initialcost accumulateddepreciationAfter taxsalvage salvage T salvage bookvalue 15 Example DepreciationandAfter taxSalvage Youpurchaseequipmentfor 100 000anditcosts 10 000tohaveitdeliveredandinstalled Basedonpastinformation youbelievethatyoucanselltheequipmentfor 17 000whenyouaredonewithitin6years Thecompany smarginaltaxrateis40 Whatisthedepreciationexpenseeachyearandtheafter taxsalvageinyear6foreachofthefollowingsituations 16 Example Straight lineDepreciation Supposetheappropriatedepreciationscheduleisstraight lineD 110 000 17 000 6 15 500everyyearfor6yearsBVinyear6 110 000 6 15 500 17 000After taxsalvage 17 000 4 17 000 17 000 17 000 17 Example Three yearMACRS BVinyear6 110 000 36 663 48 884 16 302 8 151 0 After taxsalvage 17 000 4 17 000 0 10 200 18 Example Seven YearMACRS BVinyear6 110 000 15 719 26 939 19 239 13 739 9 823 9 823 14 718 After taxsalvage 17 000 4 17 000 14 718 16 087 20 19 Example ReplacementProblem OriginalMachineInitialcost 100 000Annualdepreciation 9000Purchased5yearsagoBookValue 55 000Salvagetoday 65 000Salvagein5years 10 000 NewMachineInitialcost 150 0005 yearlifeSalvagein5years 0Costsavings 50 000peryear3 yearMACRSdepreciationRequiredreturn 10 Taxrate 40 20 ReplacementProblem ComputingCashFlows RememberthatweareinterestedinincrementalcashflowsIfwebuythenewmachine thenwewillselltheoldmachineWhatarethecashflowconsequencesofsellingtheoldmachinetodayinsteadofin5years 21 ReplacementProblem ProFormaIncomeStatements 22 ReplacementProblem IncrementalNetCapitalSpending Year0Costofnewmachine 150 000 outflow After taxsalvageonoldmachine 65 000 4 65 000 55 000 61 000 inflow Incrementalnetcapitalspending 150 000 61 000 89 000 outflow Year5After taxsalvageonoldmachine 10 000 4 10 000 10 000 10 000 outflowbecausewenolongerreceivethis 23 ReplacementProblem CashFlowFromAssets 24 ReplacementProblem AnalyzingtheCashFlows Nowthatwehavethecashflows wecancomputetheNPVandIRREnterthecashflowsComputeNPV 54 812 10ComputeIRR 36 28 Shouldthecompanyreplacetheequipment 25 EvaluatingNPVEstimates TheNPVestimatesarejustthat estimatesApositiveNPVisagoodstart nowweneedtotakeacloserlookForecastingrisk howsensitiveisourNPVtochangesinthecashflowestimates themoresensitive thegreatertheforecastingriskSourcesofvalue whydoesthisprojectcreatevalue 26 ScenarioAnalysis WhathappenstotheNPVunderdifferentcashflowsscenarios Attheveryleastlookat Bestcase revenuesarehighandcostsarelowWorstcase revenuesarelowandcostsarehighMeasureoftherangeofpossibleoutcomesBestcaseandworstcasearenotnecessarilyprobable theycanstillbepossible 27 SensitivityAnalysis WhathappenstoNPVwhenwevaryonevariableatatimeThisisasubsetofscenarioanalysiswherewearelookingattheeffectofspecificvariablesonNPVThegreaterthevolatilityinNPVinrelationtoaspecificvariable thelargertheforecastingriskassociatedwiththatvariableandthemoreattentionwewanttopaytoitsestimation 28 NewProjectExample ConsidertheprojectdiscussedinthetextTheinitialcostis 200 000andtheprojecthasa5 yearlife Thereisnosalvage Depreciationisstraight line therequiredreturnis12 andthetaxrateis34 ThebasecaseNPVis15 567 29 SummaryofScenarioAnalysis 30 SummaryofSensitivityAnalysis 31 MakingADecision Beware ParalysisofAnalysis Atsomepoint youhavetomakeadecisionIfthemajorityofyourscenarioshavepositiveNPVs thenyoucanfeelreasonablycomfortableaboutacceptingtheprojectIfyouhaveacrucialvariablethatleadstoaneg