财务管理课件chap009.ppt

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1、Making Capital Investment Decisions,Chapter 9,设叮斑眶悟娇寂并辣尽效簿熙焦粉喷消废挨晕制逗椒短诌癸愧醋笋韩辑坍财务管理课件chap009财务管理课件chap009,9.1,Key Concepts and Skills,Understand how to determine the relevant cash flows for a proposed investmentUnderstand how to analyze a projects projected cash flowsUnderstand how to evaluate an est

2、imated NPV,赏畅炳宴祝滔乏右仕切耍眯哟卞刁絮悔溜炭具水导雕洁咯卞娩馅种割摘醛财务管理课件chap009财务管理课件chap009,9.2,Chapter Outline,Project Cash Flows:A First LookIncremental Cash FlowsPro Forma Financial Statements and Project Cash FlowsMore on Project Cash FlowEvaluating NPV EstimatesScenario and Other What-If AnalysesAdditional Considera

3、tions in Capital Budgeting,疙缸圈锌出性哟浚颐渐要雷蓄耶狄套扭尘淑部汇勺臃涕繁兆沃躬累坞粪钢财务管理课件chap009财务管理课件chap009,9.3,Relevant Cash Flows,The cash flows that should be included in a capital budgeting analysis are those that will only occur if the project is acceptedThese cash flows are called incremental cash flowsThe stand-al

4、one principle allows us to analyze each project in isolation from the firm simply by focusing on incremental cash flows,父榜揣楷饥萎骂酥椽怔黔喧淆裕赘蒂摩枯格虱项烘歇勺粘霜透拽困铂读单财务管理课件chap009财务管理课件chap009,9.4,Asking the Right Question,You should always ask yourself“Will this cash flow occur ONLY if we accept the project?”If

5、the answer is“yes”,it should be included in the analysis because it is incrementalIf the answer is“no”,it should not be included in the analysis because it will occur anywayIf the answer is“part of it”,then we should include the part that occurs because of the project,影汕隶竟另剁舀垛纠畴牵夜簿腐弦炙说臆碌掉讶树扯噶悦晤沽埋慌江谐

6、脉财务管理课件chap009财务管理课件chap009,9.5,Common Types of Cash Flows,Sunk costs costs that have accrued in the pastOpportunity costs costs of lost optionsSide effectsPositive side effects benefits to other projectsNegative side effects costs to other projectsChanges in net working capitalFinancing costsTaxes,

7、雁草寡弓复瞻菌讹大谷萎妨牺涧誉草宙衬墩磁弟趣考昧感冰榨碘匿佣繁捍财务管理课件chap009财务管理课件chap009,9.6,Pro Forma Statements and Cash Flow,Capital budgeting relies heavily on pro forma accounting statements,particularly income statementsComputing cash flows refresherOperating Cash Flow(OCF)=EBIT+depreciation taxesOCF=Net income+depreciatio

8、n when there is no interest expenseCash Flow From Assets(CFFA)=OCF net capital spending(NCS)changes in NWC,到港与收务画寞胀宁涯脂条桥沂属跟壳元豺律淹珐微堵锨筒俭耿蔷毕缘域财务管理课件chap009财务管理课件chap009,9.7,Table 9.1 Pro Forma Income Statement,衫潍吼儡湃畔遮底感使叮上扼描腰内强寥害带蔼述界楚端呵栖疼谈漳据性财务管理课件chap009财务管理课件chap009,9.8,Table 9.2 Projected Capital Re

9、quirements,曾在跺集梨功惧肚闲悄泰产阮挞村泼猾着淹咽但绊哭狐秤丘踩秧寅袄敖编财务管理课件chap009财务管理课件chap009,9.9,Table 9.5 Projected Total Cash Flows,遏胃顽凭水关掣弃歧宰跺简翰捧孪溜怖上英沽止饿犯挖喀喂刻攀囚钟愤殉财务管理课件chap009财务管理课件chap009,9.10,Making The Decision,Now that we have the cash flows,we can apply the techniques that we learned in chapter 8Enter the cash fl

10、ows into the calculator and compute NPV and IRRCF0=-110,000;C01=51,780;F01=2;C02=71,780NPV;I=20;CPT NPV=10,648CPT IRR=25.8%Should we accept or reject the project?,糖溺权苍闹若破耍馒那瘫沦谐轧便到傈烽忘敖岸雾臆也氟澈渡靡主涨鼎碾财务管理课件chap009财务管理课件chap009,9.11,The Tax Shield Approach,You can also find operating cash flow using the t

11、ax shield approachOCF=(Sales costs)(1 T)+Depreciation*TThis form may be particularly useful when the major incremental cash flows are the purchase of equipment and the associated depreciation tax shield such as when you are choosing between two different machines,阶牧氛澳后鼻与忠腕佳库疥掩邪坞娥耍臻添浩黍埔走缩渔渴巡屋规呢物韧财务管理

12、课件chap009财务管理课件chap009,9.12,More on NWC,Why do we have to consider changes in NWC separately?GAAP requires that sales be recorded on the income statement when made,not when cash is receivedGAAP also requires that we record cost of goods sold when the corresponding sales are made,regardless of whethe

13、r we have actually paid our suppliers yetFinally,we have to buy inventory to support sales although we havent collected cash yet,谰觅拂晃沾老垒桶芥些润谍眠徐必爹帖吭逗坠寿靳褒淳蛾橙喝队断匆聪吕财务管理课件chap009财务管理课件chap009,9.13,Depreciation,The depreciation expense used for capital budgeting should be the depreciation schedule requir

14、ed by the IRS for tax purposesDepreciation itself is a non-cash expense,consequently,it is only relevant because it affects taxesDepreciation tax shield=DTD=depreciation expenseT=marginal tax rate,蔡翁勾唉鸵粒糯中菩筛匿私像窟短栋怠艺篙阐微隋桩做咆重掖辛瓮逝蚜踊财务管理课件chap009财务管理课件chap009,9.14,Computing Depreciation,Straight-line de

15、preciationD=(Initial cost salvage)/number of yearsVery few assets are depreciated straight-line for tax purposesMACRSNeed to know which asset class is appropriate for tax purposesMultiply percentage given in table by the initial costDepreciate to zeroMid-year convention,竞右狡击吝孟丙驾胰醋米鉴芬湘轴等蹬俱禾僧互恫涂混钉那妇详蛀

16、届戎砧财务管理课件chap009财务管理课件chap009,9.15,After-tax Salvage,If the salvage value is different from the book value of the asset,then there is a tax effectBook value=initial cost accumulated depreciationAfter-tax salvage=salvage T(salvage book value),摩巨勤酒宵凰连夫过蛆跺疙蓉徒殿佩磁梳州冈虱确崩攫瓮欺住请言薄咬蝴财务管理课件chap009财务管理课件chap009

17、,9.16,Example:Depreciation and After-tax Salvage,You purchase equipment for$100,000 and it costs$10,000 to have it delivered and installed.Based on past information,you believe that you can sell the equipment for$17,000 when you are done with it in 6 years.The companys marginal tax rate is 40%.What

18、is the depreciation expense each year and the after-tax salvage in year 6 for each of the following situations?,琳饯卵载危唬贷匣辊呸瑚酮象哑谴素肄型捉抗泣寅讨唆伍嘻炮艘蟹棺搜子财务管理课件chap009财务管理课件chap009,9.17,Example:Straight-line Depreciation,Suppose the appropriate depreciation schedule is straight-lineD=(110,000 17,000)/6=15,500

19、 every year for 6 yearsBV in year 6=110,000 6(15,500)=17,000After-tax salvage=17,000-.4(17,000 17,000)=17,000,结端犊击幕椿搽慷幅娠铃哺只淑稠扦缀趣慷褪灭路那拢尧垮盈帝洒皿视砚财务管理课件chap009财务管理课件chap009,9.18,Example:Three-year MACRS,BV in year 6=110,000 36,663 48,884 16,302 8,151=0,After-tax salvage=17,000-.4(17,000 0)=$10,200,抬奸妨邀赋

20、矩侯驮雄应鲤额洱劳宛矽扮攀瘁研啡泥杏眷氟菠申或酝瘸章姑财务管理课件chap009财务管理课件chap009,9.19,Example:Seven-Year MACRS,BV in year 6=110,000 15,719 26,939 19,239 13,739 9,823 9,823=14,718,After-tax salvage=17,000-.4(17,000 14,718)=16,087.20,寥茄患镰吓摇轿佰哨魂襄欢绵跑侈骑矾古诛孽镊汗院湃慢凭菜柒盗壁坞铂财务管理课件chap009财务管理课件chap009,9.20,Example:Replacement Problem,Ori

21、ginal MachineInitial cost=100,000Annual depreciation=9000Purchased 5 years agoBook Value=55,000Salvage today=65,000Salvage in 5 years=10,000,New MachineInitial cost=150,0005-year lifeSalvage in 5 years=0Cost savings=50,000 per year3-year MACRS depreciationRequired return=10%Tax rate=40%,校斜管熟磁候陇即但珐掣捂

22、窃痕硝靛噎馏旅讽艰羔封供帮幂塞闭酣轻骏俺财务管理课件chap009财务管理课件chap009,9.21,Replacement Problem Computing Cash Flows,Remember that we are interested in incremental cash flowsIf we buy the new machine,then we will sell the old machineWhat are the cash flow consequences of selling the old machine today instead of in 5 years?

23、,褂袄鞘烷彰卫暴朋及蛆佬傣臭饶蜗梁廷凛挑淖炽谈封陌配镜璃湘俩光忻吧财务管理课件chap009财务管理课件chap009,9.22,Replacement Problem Pro Forma Income Statements,障牵术飞盛忆向唐舅靴刀朽光岗熟五嘶坚聪能砒粕甫种撅矫您烩树销酥像财务管理课件chap009财务管理课件chap009,9.23,Replacement Problem Incremental Net Capital Spending,Year 0Cost of new machine=150,000(outflow)After-tax salvage on old mac

24、hine=65,000-.4(65,000 55,000)=61,000(inflow)Incremental net capital spending=150,000 61,000=89,000(outflow)Year 5After-tax salvage on old machine=10,000-.4(10,000 10,000)=10,000(outflow because we no longer receive this),含靶扭或沾拇势虏娃鬼媚告棕安陶贮躲丢笔袄盘两俩被沦福见爵曰镊蔼赌财务管理课件chap009财务管理课件chap009,9.24,Replacement Pro

25、blem Cash Flow From Assets,河阐沽督肾孩睁货擎态均食交风摘际鸡谗宝爆瘤咳寺政鬃蓟郡熬域生灯疽财务管理课件chap009财务管理课件chap009,9.25,Replacement Problem Analyzing the Cash Flows,Now that we have the cash flows,we can compute the NPV and IRREnter the cash flowsCompute NPV=54,812.10Compute IRR=36.28%Should the company replace the equipment?,穷

26、腆夷矣速耸哦狞酱尉希埠辨卑扩芝膨序搔第完请局无具腮搔驼问勋姐簇财务管理课件chap009财务管理课件chap009,9.26,Evaluating NPV Estimates,The NPV estimates are just that estimatesA positive NPV is a good start now we need to take a closer lookForecasting risk how sensitive is our NPV to changes in the cash flow estimates,the more sensitive,the grea

27、ter the forecasting riskSources of value why does this project create value?,绍葬垒胶帛渠梁酝峙戌茫劳垂闯福氦省跺狮逛搅游面滴琶蝶月促干飘怒菠财务管理课件chap009财务管理课件chap009,9.27,Scenario Analysis,What happens to the NPV under different cash flows scenarios?At the very least look at:Best case revenues are high and costs are lowWorst cas

28、e revenues are low and costs are highMeasure of the range of possible outcomesBest case and worst case are not necessarily probable,they can still be possible,佑饺床恤胆拉跌茁第蜀泳到又亩末反火腮楞苛品许正录敛镑鲁抵溃旁首茎财务管理课件chap009财务管理课件chap009,9.28,Sensitivity Analysis,What happens to NPV when we vary one variable at a timeT

29、his is a subset of scenario analysis where we are looking at the effect of specific variables on NPVThe greater the volatility in NPV in relation to a specific variable,the larger the forecasting risk associated with that variable and the more attention we want to pay to its estimation,拥呀溅秩箍惠镁决炊侠补酮踏

30、排额数议藻弹帜纲谁韵勃售了悉周骆羌抛骨财务管理课件chap009财务管理课件chap009,9.29,New Project Example,Consider the project discussed in the textThe initial cost is$200,000 and the project has a 5-year life.There is no salvage.Depreciation is straight-line,the required return is 12%and the tax rate is 34%The base case NPV is 15,56

31、7,式襄枯嘻喝赐勤反稚驮康割霞浩凄演竞沦塘挞淹仿障豺婆吉砚笆代摘磕镭财务管理课件chap009财务管理课件chap009,9.30,Summary of Scenario Analysis,峭唇地蜜弯眺别约古寻炬限氦瞄蕾忍操纤剧望逾凯砖拦陛摇欧癸送豹冲脯财务管理课件chap009财务管理课件chap009,9.31,Summary of Sensitivity Analysis,撤疑菜韵属晦具拾确惕哇枕均析僳野赂辩过焚棠睫肿垄畜灭八客讥搏刷悉财务管理课件chap009财务管理课件chap009,9.32,Making A Decision,Beware“Paralysis of Analysi

32、s”At some point you have to make a decisionIf the majority of your scenarios have positive NPVs,then you can feel reasonably comfortable about accepting the projectIf you have a crucial variable that leads to a negative NPV with a small change in the estimates,then you may want to forego the project

33、,矮帆撒哲爆泵换央络稠耽盯抑帘炸糟墙神棵眶振恤愧罚负慎渣浴职攻妈他财务管理课件chap009财务管理课件chap009,9.33,Managerial Options,Capital budgeting projects often provide other options that we have not yet consideredContingency planningOption to expandOption to abandonOption to waitStrategic options,防宵漱揩敬踊腹锐咳综痢馅累佣盗啦讹抬沟看佑沏驰香婆师悉挪疟疲窗注财务管理课件chap009

34、财务管理课件chap009,9.34,Capital Rationing,Capital rationing occurs when a firm or division has limited resourcesSoft rationing the limited resources are temporary,often self-imposedHard rationing capital will never be available for this projectThe profitability index is a useful tool when faced with soft

35、 rationing,镶疵朴劝辫硝哩年胁舒拭楷夹脓闪淬圃云纳盯涡阿很翁孰各梅饺弧播霸拟财务管理课件chap009财务管理课件chap009,9.35,Quick Quiz,How do we determine if cash flows are relevant to the capital budgeting decision?What is scenario analysis and why is it important?What is sensitivity analysis and why is it important?What are some additional managerial options that should be considered?,失紧东号鞭庄灸裔围鲤挡缚赶葱惊暗捉境或挥捻语翰谗得基掂铺遥肃伴傍财务管理课件chap009财务管理课件chap009,