英文版公司理财课件chapter

1、COPYRIGHTZHULI,1,Chapter 7,Net present value and other investment criteria,2,Objectives,Calculate the net present value of an investment Calculate the internal rate of return of a project and know what to look out for when using the internal rate of return rule Explain why the payback rule doesnt al

2、ways make shareholders better off Use the net present value rule to analyze three common problems that involve competing projects: (a) when to postpone an investment expenditure, (b) how to choose between projects with unequal lives, and (c) when to replace equipment Calculate the profitability inde

3、x and use it to choose between projects when funds are limited,3,Content,Net present value Other investment criteria More examples of mutually exclusive projects Capital rationing A last look,4,Net present value: 净现值 Opportunity cost of capital: 资金的机会成本 Mutually exclusive projects: 互斥项目,5,Net presen

4、t value (NPV): present value of cash flows minus investment The net present value rule states that managers increase shareholders wealth by accepting all projects that are worth more than they cost. Therefore, they should accept all projects with a positive net present value The first two steps in c

5、alculating NPVs: forecasting the cash flows and estimating the opportunity cost of capital,Net present value,6,Suppose that you have identified a possible tenant who would be prepared to rent your office block for 3 years at a fixed annual rent of $16000. You forecast that after you have collected t

6、he third years rent the building could be sold for $450000. Assume that the opportunity cost of capital is r = 7%,7,A factory costs $400,000. You reckon that it will produce an inflow after operating costs of $100,000 in year 1, $200,000 in year 2, and $300,000 in year 3. The opportunity cost of cap

7、ital is 12 percent. Draw up a worksheet and use tables to calculate the NPV.,8,When you need to choose among mutually exclusive projects, the decision rule is simple: calculate the NPV of each alternative, and choose the highest positive-NPV project,Mutually exclusive projects: two or more projects

8、that cannot be pursued simultaneously,9,Using the NPV rule to choose among projects,Reinvestment assumption: the NPV rule assumes that all cash flows can be reinvested at the discount rate. Minimum Acceptance Criteria: Accept if NPV 0 Ranking Criteria: Choose the highest NPV,10,Content,Net present v

9、alue Other investment criteria More examples of mutually exclusive projects Capital rationing A last look,11,Payback period: 投资回收期 Internal rate of return (IRR): 内含报酬率,12,Payback,Payback period: time until cash flows recover the initial investment in the project The payback rule states that a projec

10、t should be accepted if its payback period is less than a specified cutoff period To use the payback rule, a firm has to decide on an appropriate cutoff period 基准期,13,Advantages Simplicity Disadvantages Payback does not consider any cash flows that arrive after the payback period Payback does not co

11、nsider the time value of money,14,Internal rate of return,Two rules for deciding whether to go ahead with an investment project 1. The NPV rule. Invest in any project that has a positive NPV when its cash flows are discounted at the opportunity cost of capital 2. The rate of return rule. Invest in a

12、ny project offering a rate of return that is higher than the opportunity cost of capital The rate of return or internal rate of return (IRR) is the discount rate at which NPV equals zero The rate or return rule will give the same answer as the NPV rule as long as the NPV of a project declines smooth

13、ly as the discount rate increase,15,Suppose you rent out the office block for 3 years, the cash flows are as follows:,Trial and error,16,IRR = 12.96%,You can accept a project if the rate of return exceeds the opportunity cost of capital,17,Remember:,The project IRR measures the profitability of the

14、project. It is an internal rate of return in the sense that it depends only on the projects own cash flows. The opportunity cost of capital is the standard for deciding whether to accept the project. It is equal to the return offered by equivalent-risk investments in the capital market.,18,Some pitf

15、alls with the internal rate of return rule When NPV is higher as the discount rate increases, a project is acceptable only if its internal rate of return is less than the opportunity cost of capital,19,When there are multiple changes in the sign of the cash flows, the IRR rule does not work, but the

16、 NPV rule always does,20,A high IRR is not an end in itself. You want projects that increase the value of the firm. Projects that earn a good rate of return for a long time often have higher NPVs than those that offer high percentage rates of return but die young,21,Content,Net present value Other i

17、nvestment criteria More examples of mutually exclusive projects Capital rationing A last look,22,Content,Net present value Other investment criteria More examples of mutually exclusive projects Capital rationing A last look,23,Capital rationing: 资本限额、资本约束 Soft rationing: 资本的软约束 Hard rationing: 资本的硬约

18、束 profitability index: 盈利能力指数,24,Capital rationing: limit set on the amount of funds available for investment Soft rationing is not imposed by investors, but imposed by top management Hard rationing means that the firm actually cannot raise the money it needs The solution is to pick the projects that give the highest NPV p