4-analyzinginvestmentproject投资净现值分析

1,1,1,1,ChapterFour,AnalyzingInvestmentproject,2,2,2,Contents,TheconceptofcapitalbudgetingThestepsofinvestmentanalysisEstimationofcostofcapitalMeasurecashflowsTheapproachesofcapitalbudgeting,3,3,Whatisainvestmentoraproject?,Anydecisionthatrequirestheuseofresources(financialorotherwise)isaproject.BroadstrategicdecisionsEnteringnewareasofbusinessEnteringnewmarketInvestinginequipmenttoreducecostsAcquiringothercompanies,4,WhatisCorporateFinancetalkingabout,BalanceSheet,CurrentAssetsFixedAssetsTotalAssets,CurrentLiabilitiesLong-termLiabilitiesShareholdersEquityTotalLiabilitiesandShareholdersEquity,Investmentdecision(CapitalBudgeting,Financingdecision(CapitalStructure),CashManagement,4,5,5,5,Capitalbudgeting,Theprocessofanalyzinginvestmentdecisionsforafirmiscalledcapitalbudgeting.Welllookathowtousediscountedcashflow(DCF)analysisandnetpresentvalue(NPV)andotherrulesincapitalbudgetingdecisionmaking.,6,6,StepsinInvestmentAnalysis,Estimateahurdleratefortheproject,basedupontheriskinessoftheinvestmentEstimaterevenuesandaccountingearningsontheinvestment.ConvertaccountingearningsintocashflowsUsethecashflowstoevaluatewhethertheinvestmentisagoodinvestment.TimeweightthecashflowsUsethetime-weightedcashflowstoevaluatewhethertheinvestmentisagoodinvestment.Evaluateinvestmentandmakedecisions,7,7,EstimatingtheHurdleRateforanInvestment,Ifafirmisinonlyonebusiness,andallofitsinvestmentsarehomogeneous:Usethecompanyscostsofcapitaltoevaluateitsinvestments.Ifthefirmisinmorethanonebusiness,butinvestmentswithineachofbusinessaresimilar:Usethedivisionalcostsofcapitaltoevaluateinvestmentsmadebythatdivision,8,8,Example：Supposethatafirm100%equityfunded,ithasthreedivisions:(1)electronicswhichisoccupied30%ofthefirmsmarketvalue,thecostofcapitalis22%;(2)chemicaldepartmentwhichhas40%ofmarketvalue,itscostofcapitalis17%;(3)naturegastransmissiondivisionhas30%ofmarketvalue,thecostofcapitalis14%.theweightedaveragecostofcapitalofthefirm=0.322%+0.417%+0.314%=17.6%whenweconductcapitalbudgetingforaproject,assumeitssimilartoelectronicindustry,ifweuse17.6%ashurdlerateofthenewinvestment,nodoubtwewouldovervaluetheinvestment,wouldmakeworrydecisionintheconsequence.Howweestimatetheappropriatediscountratethen?,9,EstimatingtheHurdleRateforanInvestment,Ifafirmisplanningonenteringanewbusiness:Estimateacostofequityfortheinvestment,basedupontheriskinessoftheinvestmentEstimateacostofdebtanddebtratiofortheinvestmentbaseduponthecostsofdebtanddebtratiosofotherfirmsinthebusiness.,9,10,EstimatingtheHurdleRateforanInvestment,Thehurdlerateofaparticularprojectbasedupontherisknessofit.Theriskthatisrelevantincomputingaprojectscostofcapitalistheriskoftheprojectscashflowsandnottheriskofthefinancinginstrumentsthefirmissuestofinancetheproject.,10,11,11,Example:supposethatCompusellCorporationisplanningtofinance$5millionoutlayrequiredtoundertakeanewprojectbyissuingbonds.SupposeCompusellcanissuebondsataninterestrateof6%peryear.Canweadopts6%asthecostofcapitaltoevaluatethenewproject?Why?,12,12,EstimatingtheHurdleRateforanInvestment,Financingmixofaprojectorafirm,Ownersfunds(equity),Borrowedmoney(debt),Costofdebt?rB,Costofequity？rE,CAPM,Aftertaxofinterests/actualmoneyfunded,TheWeightedAverageCostofCapital：,13,13,EstimatingtheHurdleRateforanInvestment,InvestorandInvestee,Requirearateofreturn,Costofcapital,Step2,14,Step2:Estimaterevenuesandaccountingearningsontheinvestment.Step3:Convertaccountingearningsintocashflows,14,MeasureCashFlows,15,15,15,Thefeaturesofcashflowsincapitalbudgeting,CashflowsfromoperatingactivitiesAftertaxcashflowsIncrementalcashflowsoperating+aftertax+incremental,16,16,16,Incrementalcashflows,IncalculatingtheNPVofaproject,incrementalcashflowsshouldbeused.Thesecashflowarethechangesinthefirmscashflowsthatoccurasadirectconsequenceofacceptingtheproject.Thedifferencebetweenthecashflowsofthefirmwiththeprojectandthecashflowsofthefirmwithouttheproject.,17,17,FromCashFlowstoIncrementalCashFlows,TheKeyQuestionstodeterminewhetheracashflowisincremental:WhatwillhappentothiscashflowitemifIaccepttheinvestment?WhatwillhappentothiscashflowitemifIdonotaccepttheinvestment?Ifthecashflowwilloccurwhetheryoutakethisinvestmentorrejectit,itisnotanincrementalcashflow.,18,18,SunkCosts,Anyexpenditurethathasalreadybeenincurred,andcannotberecovered(evenifaprojectisrejected)iscalledasunkcost.Whenanalyzingaproject,sunkcostsshouldnotbeconsideredsincetheyarenotincremental.Bythisdefinition,markettestingexpensesandRpriceincreases2%peryearthereafter.Productioncostsduringfirstyearare$10perunitandincrease10%peryearthereafter.Annualinflationrate:5%WorkingCapital:initial$10,000changeswithsales,42,TheBaldwinCompany,Attheendoftheproject,thewarehouseisunencumbered,sowecansellitifwewantto.,Year0Year1Year2Year3Year4Year5Investments:(1)Bowlingballmachine100.0021.77(2)Accumulated20.0052.0071.2082.7094.20depreciation(3)Adjustedbasisof80.0048.0028.8017.305.80machineafterdepreciation(endofyear)(4)Opportunitycost150.00150.00(warehouse)(5)Networkingcapital10.0010.0016.3224.9721.220(endofyear)(6)Changeinnet10.006.328.653.7521.22workingcapital(7)Totalcashflowof260.006.328.653.75193.00investment(1)+(4)+(6),($thousands)(Allcashflowsoccurattheendoftheyear.),43,TheBaldwinCompany,Year0Year1Year2Year3Year4Year5Income:(8)SalesRevenues100.00163.20249.70212.24129.89,Recallthatproduction(inunits)byyearduringthe5-yearlifeofthemachineisgivenby:(5,000,8,000,12,000,10,000,6,000).Priceduringthefirstyearis$20andincreases2%peryearthereafter.Salesrevenueinyear2=8,000$20(1.02)1=8,000$20.40=$163,200.,44,TheBaldwinCompany,Year0Year1Year2Year3Year4Year5Income:(8)SalesRevenues100.00163.20249.70212.24129.89(9)Operatingcosts50.0088.00145.20133.1087.85,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=$88,000,45,TheBaldwinCompany,Year0Year1Year2Year3Year4Year5Income:(8)SalesRevenues100.00163.20249.70212.24129.89(9)Operatingcosts50.0088.00145.20133.1087.85(10)Depreciation20.0032.0019.2011.5011.50,DepreciationiscalculatedusingtheModifiedAcceleratedCostRecoverySystem(shownatright).Ourcostbasisis$100,000.Depreciationchargeinyear4=$100,000(.115)=$11,500.,46,TheBaldwinCompany,Year0Year1Year2Year3Year4Year5Income:(8)SalesRevenues100.00163.20249.70212.24129.89(9)Operatingcosts50.0088.00145.20133.1087.85(10)Depreciation20.0032.0019.2011.5011.50(11)Incomebeforetaxes30.0043.2085.3067.6430.55(8)(9)-(10)(12)Taxat34percent10.2014.6929.0023.0010.39(13)NetIncome19.8028.5156.3044.6420.16,47,IncrementalAfterTaxCashFlows,48,Exercise,Youareinthefinancedepartmentofafirmandyouareevaluatingaprojectproposal.Youhavedevelopedthefollowingfinancialprojectionsandyouarecalculating:Theincrementalcashflowsoftheproject.Thecorporatetaxrateis34%andthefinancialprojectionsareinthousands.,48,49,InvestmentRulesThepracticeofCapitalBudgeting,NetPresentValue-NPVThePaybackPeriodMethodTheDiscountedPaybackPeriodMethodTheProfitabilityIndexTheInternalRateofReturnProblemswiththeIRRApproach,50,WhyUseNetPresentValue?,AcceptingpositiveNPVprojectsbenefitsshareholders.NPVusescashflowsNPVusesallthecashflowsoftheprojectNPVdiscountsthecashflowsproperly,51,TheNetPresentValue(NPV)Rule,NetPresentValue(NPV)=TotalPVoffutureCFs+InitialInvestmentEstimatingNPV:1.Estimatefuturecashflows:howmuch?andwhen?2.Estimatediscountrate3.EstimateinitialcostsMinimumAcceptanceCriteria:AcceptifNPV0RankingCriteria:ChoosethehighestNPV,52,52,Moreonthinking,BoeinghasdoneitsSuperJumboJetinvestmentprojectanalysis,theprojectsNPVis4019million.Howwouldyouexplaintheresultandwhatdecisionwouldyoumake?WhataboutdoesitsNPV=$100?Wouldyouchangeyourdecisions?,53,CalculatingNPVwithSpreadsheets,SpreadsheetsareanexcellentwaytocomputeNPVs,especiallywhenyouhavetocomputethecashflowsaswell.UsingtheNPVfunction:Thefirstcomponentistherequiredreturnenteredasadecimal.Thesecondcomponentistherangeofcashflowsbeginningwithyear1.AddtheinitialinvestmentaftercomputingtheNPV.,54,ThePaybackPeriodMethod,Howlongdoesittaketheprojectto“payback”itsinitialinvestment?PaybackPeriod=numberofyearstorecoverinitialcostsMinimumAcceptanceCriteria:SetbymanagementRankingCriteria:Setbymanagement,ThePaybackPeriodMethod,Disadvantages:IgnoresthetimevalueofmoneyIgnorescashflowsafterthepaybackperiodBiasedagainstlong-termprojectsRequiresanarbitraryacceptancecriteriaAprojectacceptedbasedonthepaybackcriteriamaynothaveapositiveNPVAdvantages:EasytounderstandBiasedtowardliquidity,56,TheDiscountedPaybackPeriod,Howlongdoesittaketheprojectto“payback”itsinitialinvestment,takingthetimevalueofmoneyintoaccount?Decisionrule:Accepttheprojectifitpaysbackonadiscountedbasiswithinthespecifiedtime.Bythetimeyouhavediscountedthecashflows,youmightaswellcalculatetheNPV.,57,TheInternalRateofReturn,IRR:thediscountratethatsetsNPVtozeroMinimumAcceptanceCriteria:AcceptiftheIRRexceedstherequiredreturnRankingCriteria:SelectalternativewiththehighestIRRReinvestmentassumption:AllfuturecashflowsareassumedtobereinvestedattheIRR,InternalRateofReturn(IRR),Disadvantages:DoesnotdistinguishbetweeninvestingandborrowingIRRmaynotexist,ortheremaybemultipleIRRsProblemswithmutuallyexclusiveinvestmentsAdvantages:Easytounderstandandcommunicate,59,IRR:Example,Considerthefollowingproject:,Theinternalrateofreturnforthisprojectis19.44%,60,NPVPayoffProfile,IfwegraphNPVversusthediscountrate,wecanseetheIRRasthex-axisintercept.,61,ProblemswithIRR,MultipleIRRsAreWeBorrowingorLendingTheScaleProblemTheTimingProblem,62,MutuallyExclusivevs.Independent,MutuallyExclusiveProjects:onlyONEofseveralpotentialprojectscanbechosen,e.g.,acquiringanaccountingsystem.RANKallalternatives,andselectthebestone.IndependentProjects:acceptingorrejectingoneprojectdoesnotaffectthedecisionoftheotherprojects.MustexceedaMINIMUMacceptancecriteria,63,63,Case1:IRRversusNPV,Consideraprojectwiththefollowingcashflows:YearCashFlow0-1000180021000313004-2200PleasecalculateitsIRR,64,64,Whatdowedonow?,Thisprojecthastwointernalratesofreturn.Thefirstis6.60%,whereasthesecondis36.55%.Whyaretheretwointernalratesofreturnonthisproject?Ifyourcostofcapitalis12.32%,wouldyouacceptorrejectthisproject?IwouldrejecttheprojectIwouldacceptthisprojectExplain.,65,Case2:BorrowingorLending,ProjectA：ProjectB：,0,1,-100,130,100,-130,IRR=30%NPV10%=18.2Discountrate1CannotbeusedtorankmutuallyexclusiveprojectsMaybeusedtorankprojectsinthepresenceofcapitalrationing,85,SummaryPaybackCriteria,PaybackperiodLengthoftimeuntilinitialinvestmentisrecoveredTaketheprojectifitpaysbackinsomespecifiedperiodDoesnotaccountfortimevalueofmoney,andthereisanarbitrarycutoffperiodDiscountedpaybackperiodLengthoftimeuntilinitialinvestmentisrecoveredonadiscountedbasisTaketheprojectifitpaysbackinsomespecifiedperiodThereisanarbitrarycutoffperiod,86,86,Case:NPVandProjectLife,ProjectA,-$1500,$350,$350,$350,$350,$350,-$1000,$400,$400,$400,$400,$400,$350,$350,$350,$350,$350,ProjectB,NPVofProjectA=$442,NPVofProjectB=$478,HurdleRateforBothProjects=12%,87,87,ChoosingBetweenMutuallyExclusiveProjects,Thenetpresentvaluesofmutuallyexclusiveprojectswithdifferentlivescannotbecompared,sincethereisabiastowardslonger-lifeprojects.Todothecomparison,wehavetoreplicatetheprojectstilltheyhavethesamelife(or)convertthenetpresentvaluesintoannuities,88,88,Solutio