公司理财(罗斯)第六版第8章ppt课件.ppt

MakingCapitalInvestmentDecisions Chapter8 KeyConceptsandSkills UnderstandhowtodeterminetherelevantcashflowsforvarioustypesofcapitalinvestmentsBeabletocomputedepreciationexpensefortaxpurposesIncorporateinflationintocapitalbudgetingUnderstandthevariousmethodsforcomputingoperatingcashflowApplytheEquivalentAnnualCostapproach ChapterOutline 8 1IncrementalCashFlows8 2TheBaldwinCompany AnExample8 3InflationandCapitalBudgeting8 4AlternativeDefinitionsofCashFlow8 5InvestmentsofUnequalLives TheEquivalentAnnualCostMethod 8 1IncrementalCashFlows Cashflowsmatter notaccountingearnings Sunkcostsdon tmatter Incrementalcashflowsmatter Opportunitycostsmatter Sideeffectslikecannibalismanderosionmatter Taxesmatter wewantincrementalafter taxcashflows Inflationmatters CashFlows NotAccounting Considerdepreciationexpense Youneverwriteacheckmadeoutto depreciation Muchoftheworkinevaluatingaprojectliesintakingaccountingnumbersandgeneratingcashflows IncrementalCashFlows SunkcostsarenotrelevantJustbecause wehavecomethisfar doesnotmeanthatweshouldcontinuetothrowgoodmoneyafterbad Opportunitycostsdomatter JustbecauseaprojecthasapositiveNPV thatdoesnotmeanthatitshouldalsohaveautomaticacceptance Specifically ifanotherprojectwithahigherNPVwouldhavetobepassedup thenweshouldnotproceed IncrementalCashFlows Sideeffectsmatter Erosionandcannibalismarebothbadthings Ifournewproductcausesexistingcustomerstodemandlessofcurrentproducts weneedtorecognizethat If however synergiesresultthatcreateincreaseddemandofexistingproducts wealsoneedtorecognizethat EstimatingCashFlows CashFlowfromOperationsRecallthat OCF EBIT Taxes DepreciationNetCapitalSpendingDon tforgetsalvagevalue aftertax ofcourse ChangesinNetWorkingCapitalRecallthatwhentheprojectwindsdown weenjoyareturnofnetworkingcapital InterestExpense Laterchapterswilldealwiththeimpactthattheamountofdebtthatafirmhasinitscapitalstructurehasonfirmvalue Fornow it senoughtoassumethatthefirm slevelofdebt and hence interestexpense isindependentoftheprojectathand 8 2TheBaldwinCompany Costsoftestmarketing alreadyspent 250 000Currentmarketvalueofproposedfactorysite whichweown 150 000Costofbowlingballmachine 100 000 depreciatedaccordingtoMACRS5 year Increaseinnetworkingcapital 10 000Production inunits byyearduring5 yearlifeofthemachine 5 000 8 000 12 000 10 000 6 000 TheBaldwinCompany Priceduringfirstyearis 20 priceincreases2 peryearthereafter Productioncostsduringfirstyearare 10perunitandincrease10 peryearthereafter Annualinflationrate 5 WorkingCapital initial 10 000changeswithsales TheBaldwinCompany Year0Year1Year2Year3Year4Year5Investments 1 Bowlingballmachine 100 0021 76 2 Accumulated20 0052 0071 2082 7294 24depreciation 3 Adjustedbasisof80 0048 0028 8017 285 76machineafterdepreciation endofyear 4 Opportunitycost 150 00150 00 warehouse 5 Networkingcapital10 0010 0016 3224 9721 220 endofyear 6 Changeinnet 10 00 6 32 8 653 7521 22workingcapital 7 Totalcashflowof 260 00 6 32 8 653 75192 98investment 1 4 6 thousands Allcashflowsoccurattheendoftheyear TheBaldwinCompany Attheendoftheproject thewarehouseisunencumbered sowecansellitifwewantto Year0Year1Year2Year3Year4Year5Investments 1 Bowlingballmachine 100 0021 76 2 Accumulated20 0052 0071 2082 7294 24depreciation 3 Adjustedbasisof80 0048 0028 8017 285 76machineafterdepreciation endofyear 4 Opportunitycost 150 00150 00 warehouse 5 Networkingcapital10 0010 0016 3224 9721 220 endofyear 6 Changeinnet 10 00 6 32 8 653 7521 22workingcapital 7 Totalcashflowof 260 00 6 32 8 653 75192 98investment 1 4 6 TheBaldwinCompany Year0Year1Year2Year3Year4Year5Income 8 SalesRevenues100 00163 20249 72212 20129 90 Recallthatproduction inunits byyearduringthe5 yearlifeofthemachineisgivenby 5 000 8 000 12 000 10 000 6 000 Priceduringthefirstyearis 20andincreases2 peryearthereafter Salesrevenueinyear3 12 000 20 1 02 2 12 000 20 81 249 720 TheBaldwinCompany Year0Year1Year2Year3Year4Year5Income 8 SalesRevenues100 00163 20249 72212 20129 90 9 Operatingcosts50 0088 00145 20133 1087 84 Again production inunits byyearduring5 yearlifeofthemachineisgivenby 5 000 8 000 12 000 10 000 6 000 Productioncostsduringthefirstyear perunit are 10 andtheyincrease10 peryearthereafter Productioncostsinyear2 8 000 10 1 10 1 88 000 TheBaldwinCompany Year0Year1Year2Year3Year4Year5Income 8 SalesRevenues100 00163 20249 72212 20129 90 9 Operatingcosts50 0088 00145 20133 1087 84 10 Depreciation20 0032 0019 2011 5211 52 DepreciationiscalculatedusingtheAcceleratedCostRecoverySystem shownatright Ourcostbasisis 100 000 Depreciationchargeinyear4 100 000 1152 11 520 TheBaldwinCompany Year0Year1Year2Year3Year4Year5Income 8 SalesRevenues100 00163 20249 72212 20129 90 9 Operatingcosts50 0088 00145 20133 1087 84 10 Depreciation20 0032 0019 2011 5211 52 11 Incomebeforetaxes30 0043 2085 3267 5830 54 8 9 10 12 Taxat34percent10 2014 6929 0122 9810 38 13 NetIncome19 8028 5156 3144 6020 16 IncrementalAfterTaxCashFlows NPVofBaldwinCompany 1 39 80 51 588 260 CF1 F1 CF0 I NPV 10 1 54 19 CF2 F2 1 66 86 CF3 F3 1 59 87 CF4 F4 1 224 66 CF5 F5 8 3InflationandCapitalBudgeting Inflationisanimportantfactofeconomiclifeandmustbeconsideredincapitalbudgeting Considertherelationshipbetweeninterestratesandinflation oftenreferredtoastheFisherequation 1 NominalRate 1 RealRate 1 InflationRate InflationandCapitalBudgeting Forlowratesofinflation thisisoftenapproximated RealRate NominalRate InflationRateWhilethenominalrateintheU S hasfluctuatedwithinflation therealratehasgenerallyexhibitedfarlessvariancethanthenominalrate Incapitalbudgeting onemustcomparerealcashflowsdiscountedatrealratesornominalcashflowsdiscountedatnominalrates OtherMethodsforComputingOCF Bottom UpApproachWorksonlywhenthereisnointerestexpenseOCF NI depreciationTop DownApproachOCF Sales Costs TaxesDon tsubtractnon cashdeductionsTaxShieldApproachOCF Sales Costs 1 T Depreciation T 8 5InvestmentsofUnequalLives TherearetimeswhenapplicationoftheNPVrulecanleadtothewrongdecision Considerafactorythatmusthaveanaircleanerthatismandatedbylaw Therearetwochoices The Cadillaccleaner costs 4 000today hasannualoperatingcostsof 100 andlasts10years The Cheapskatecleaner costs 1 000today hasannualoperatingcostsof 500 andlasts5years Assuminga10 discountrate whichoneshouldwechoose InvestmentsofUnequalLives Atfirstglance theCheapskatecleanerhasahigherNPV 10 100 4 614 46 4 000 10 5 500 2 895 39 1 000 10 InvestmentsofUnequalLives ThisoverlooksthefactthattheCadillaccleanerlaststwiceaslong Whenweincorporatethat theCadillaccleanerisactuallycheaper i e hasahigherNPV InvestmentsofUnequalLives ReplacementChainRepeatprojectsuntiltheybeginandendatthesametime ComputeNPVforthe repeatedprojects TheEquivalentAnnualCostMethod ReplacementChainApproach TheCadillaccleanertimelineofcashflows TheCheapskatecleanertimelineofcashflowsovertenyears ReplacementChainApproach 10 100 4 614 4 000 10 4 500 4 693 1 000 CF1 F1 CF0 I NPV 10 1