公司理财CapitalInvestmentDecisions(2)ppt课件

1、Capital Investment Decisions2.1 Net Present Value2.2 Project Valuation in a Riskless World Fishers Principle2.3 Present Value and Compounding2.4 Present Value with Special Cash Flows (RWJ Ch 3, 4)Investment DecisionExample 1: Suppose an investment that promises to pay $10,000 in one year is offered

2、for sale for $9,500. Your interest rate is 5%. Should you buy? If you were to be promised $10,000 due in one year when interest rates are at 5-percent, your investment be worth $9,523.81 in todays dollars. 2.1 Net Present Value : FV and PV The amount that a borrower would need to set aside today to

3、to able to meet the promised payment of $10,000 in one year is call the Present Value (PV) of $10,000.Note that $10,000 = $9,523.81(1.05). If you were to invest $10,000 at 5-percent interest for one year, your investment would grow to $10,500 : $10,500 = $10,000(1.05).The total amount due at the end

4、 of the investment is call the Future Value (FV). Net Present ValueThe Net Present Value (NPV) of an investment is the present value of the expected cash flows, less the cost of the investment. : So you should Invest.Back to Example 1:Net Present Value as the Investment CriterionIn the one-period ca

5、se, the formula for NPV can be written as:If we had not undertaken the positive NPV project considered on the last slide, and instead invested our $9,500 elsewhere at 5-percent, our FV would be less than the $10,000 that investment promised and we would be unambiguously worse off in FV terms as well

6、:$9,500(1.05) = $9,975 $10,000.,where is cash flow at date 12.2 Project Evaluation in a Riskless WorldWhy do we use NPV as the investment criterion ?Assume Perfect Capital Market and Two Period(I) Saving (Financing) Decision Use PV to Check Feasibility of Consumption planExample 2: Is the consumptio

7、n plan C00.9m and C11.325m feasible?Use the PV formula to evaluate it.If r10%, 0.9 2.105PV(C)1 2.091PV(Y) : not feasibleIf r20%, 0.9 2.004PV(C)1 2.000PV(Y) : not feasibleIf r30%, 0.9 1.919PV(C)1 1.923PV(Y) : feasible!()Investment OpportunitiesCorporate Investment DecisionMakingConsumption at t+1Posi

8、tive NPV projects shift the shareholders opportunity set out, which is unambiguously good.All shareholders agree on their preference for positive NPV projects, whether they are borrowers or lenders.() Investment Opportunities with Financial MarketsFinancial markets present saving/borrowing opportuni

9、ties, as represented by the dotted straight line. Suppose the company (farm) chooses D, its owners can then use financial markets for saving or borrowing. Both investors are happier than in (), but D is not the optimal investment plan yet.C0BADEC1slope = -(1+r)PV(D)Project Valuation in a Riskless Wo

10、rldC0ADEslope = -(1+r)PV(Y)C1BY*Y1Y0Y* is the optimal investment plan, which is the one that maximizes NPV(Y)PV(Y)E or PV(Y). Perfect capital market (borrowing ratelending rate) is assumed.Corporate Investment DecisionMakingIn reality, shareholders do not vote on every investment decision faced by a

11、 firm and the managers of firms need decision rules to operate by.All shareholders of a firm will be made better off if managers follow the NPV ruleundertake positive NPV projects and reject negative NPV projects. Optimal Investment PlanNet Present Value NPV PV(Y)ETherefore, the best investment plan

12、 is the one that maximizes NPV(Y); and the best investment plan is independent of investors preferences.PVNPV Fishers Separation PrincipleGiven perfect capital market and certainty, the optimal investment plan is the one that maximizes the net present value of available production plans, without reg

13、ard to the individuals subjective preferences that enter into their consumption/saving decisions. (Irving Fisher) This is the basis for using the present value as the evaluation criterion.Separation of investment and financing decisionsSeparation of ownership and management.Why do we use NPV or PV a

14、s investment criterionNPV as Investment Criterion2.3 Present Value and CompoundingHow much would an investor have to set aside today in order to have $20,000 five years from now if the current rate is 15%?012345$20,000PVHow Long is the Wait?Example 5: If we deposit $5,000 today in an account paying

15、10%, how long does it take to grow to $10,000?Example 6: Assume the total cost of a college education will be $50,000 when your child enters college in 12 years. You have $5,000 to invest today. What rate of interest must you earn on your investment to cover the cost of your childs education?What Ra

16、te Is Enough?2.4 PV with Special Cash FlowsPerpetuityA constant stream of cash flows that lasts forever.Growing perpetuityA stream of cash flows that grows at a constant rate forever.AnnuityA stream of constant cash flows that lasts for a fixed number of periods.Growing annuityA stream of cash flows

17、 that grows at a constant rate for a fixed number of periods.PerpetuityA constant stream of cash flows that lasts forever.01C2C3CThe formula for the present value of a perpetuity is:Growing PerpetuityA growing stream of cash flows that lasts forever.01C2C(1+g)3C (1+g)2The formula for the present value of a growing perpetuity is:AnnuityA constant stream of cash flows with a fixed maturity.01C2C3CThe formula for the present value of an annuity is:TCGrowing AnnuityA growing stream of cash flows with a fixed maturity.01CThe formula for th