文档介绍：Chapter 7
Net Present Value and Other Investment Criteria
利用现金流量计算式进行估价
Bond Stock
Xanth Corporation
$1000
Annual coupon$80 10years
Project investment
Current Assets
Fixed Assets
1 Tangible
2 Intangible
Total Value of Assets:
Shareholders’ Equity
Current Liabilities
Long-Term Debt
Total Firm Value to Investors:
The Capital Budgeting Decision
What long-term investments should the firm engage in?
Chapter Outline
Net Present Value
The Payback Rule
The Discounted Payback
The Average Accounting Return
The Internal Rate of Return
The Profitability Index
The Practice of Capital Budgeting
Good Decision Criteria
We need to ask ourselves the following questions when evaluating capital budgeting decision rules
Does the decision rule adjust for the time value of money?
Does the decision rule adjust for risk?
Does the decision rule provide information on whether we are creating value for the firm?
1. Net Present Value (NPV)
NPV—The difference between the market value of a project and its cost P262
How much value is created from undertaking an investment?
Estimate the expected future cash flows.
Estimate the required return for projects of this risk level.
Find the present value of the cash flows and subtract the initial investment.
Why NPV?
One way to add value(当卖价可估时)
买卖差价
现金流现值
Another way to add value(当卖价难以估计时)
NPV – Decision Rule
If the NPV is positive, accept the project
A positive NPV means that the project is expected to add value to the firm and will therefore increase the wealth of the owners.
Since our goal is to increase owner wealth, NPV is a direct measure of how well this project will meet our goal.
Project Investment Example
Example P264
NPV
考虑时间价值
考虑风险
体现项目增加值
2. Payback Period
How long does it take to get the initial cost back in a nominal sense?
Computation
Estimate the cash flows
Subtract the future cash flows from the initial cost until the initial investment has been recovered
Decision Rule – Accept if the payback perio