第六章投資決策的其他方法英語

1、mcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-0chapter outline6.1 why use net present value?6.2 the payback period rule6.3 the discounted payback period rule6.4 the average accounting return6.5 the internal rate of return6.6 problems with the irr approach6.

2、7 the profitability index6.8 the practice of capital budgeting6.9 summary and conclusionsmcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-16.1 why use net present value? accepting positive npv projects benefits shareholders.npv uses cash flowsnpv uses all the

3、cash flows of the projectnpv discounts the cash flows properlymcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-2the net present value (npv) rule net present value (npv) = total pv of future cfs + initial investment estimating npv: 1. estimate future cash flows

4、: how much? and when? 2. estimate discount rate 3. estimate initial costs minimum acceptance criteria: accept if npv 0 ranking criteria: choose the highest npvmcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-3good attributes of the npv rule 1. uses cash flows

5、2. uses all cash flows of the project 3. discounts all cash flows properly reinvestment assumption: the npv rule assumes that all cash flows can be reinvested at the discount rate.mcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-46.2 the payback period rule ho

6、w long does it take the project to “pay back” its initial investment? payback period = number of years to recover initial costs minimum acceptance criteria: set by management ranking criteria: set by managementmcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-5

7、the payback period rule (continued) disadvantages: ignores the time value of money ignores cash flows after the payback period biased against long-term projects requires an arbitrary acceptance criteria a project accepted based on the payback criteria may not have a positive npv advantages: easy to

8、understand biased toward liquiditymcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-66.3 the discounted payback period rule how long does it take the project to “pay back” its initial investment taking the time value of money into account? by the time you have

9、discounted the cash flows, you might as well calculate the npv.mcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-76.4 the average accounting return rule another attractive but fatally flawed approach. ranking criteria and minimum acceptance criteria set by mana

10、gement disadvantages: ignores the time value of money uses an arbitrary benchmark cutoff rate based on book values, not cash flows and market values advantages: the accounting information is usually available easy to calculateinvestent of valuebook averageincomenet averageaar mcgraw-hill/irwincopyri

11、ght 2002 by the mcgraw-hill companies, inc. all rights reserved.6-8 6.5 the internal rate of return (irr) rule irr: the discount that sets npv to zero minimum acceptance criteria: accept if the irr exceeds the required return. ranking criteria: select alternative with the highest irr reinvestment as

12、sumption: all future cash flows assumed reinvested at the irr. disadvantages: does not distinguish between investing and borrowing. irr may not exist or there may be multiple irr problems with mutually exclusive investments advantages: easy to understand and communicatemcgraw-hill/irwincopyright 200

13、2 by the mcgraw-hill companies, inc. all rights reserved.6-9the internal rate of return: exampleconsider the following project:0123$50$100$150-$200the internal rate of return for this project is 19.44%200$)1 (150$)1 (100$)1 (50$032irrirrirrnpvmcgraw-hill/irwincopyright 2002 by the mcgraw-hill compan

14、ies, inc. all rights reserved.6-10the npv payoff profile for this examplediscount ratenpv0%$100.004%$71.048%$47.3212%$27.7916%$11.6520%($1.74)24%($12.88)28%($22.17)32%($29.93)36%($36.43)40%($41.86)if we graph npv versus discount rate, we can see the irr as the x-axis intercept.irr = 19.44%($60.00)($

15、40.00)($20.00)$0.00$20.00$40.00$60.00$80.00$100.00$120.00-1%9%19%29%39%discount ratenpvmcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-116.6 problems with the irr approach multiple irrs. are we borrowing or lending? the scale problem. the timing problem.mcgra

16、w-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-12multiple irrsthere are two irrs for this project: 0 1 2 3$200 $800-$200- $800($150.00)($100.00)($50.00)$0.00$50.00$100.00-50%0%50%100%150%200%discount ratenpv100% = irr20% = irr1which one should we use? mcgraw-hill

17、/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-13the scale problemwould you rather make 100% or 50% on your investments?what if the 100% return is on a $1 investment while the 50% return is on a $1,000 investment?mcgraw-hill/irwincopyright 2002 by the mcgraw-hill compa

18、nies, inc. all rights reserved.6-14the timing problem0 1 2 3$10,000 $1,000$1,000-$10,000project a0 1 2 3$1,000 $1,000 $12,000-$10,000project bthe preferred project in this case depends on the discount rate, not the irr. mcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights re

19、served.6-15the timing problem($4,000.00)($3,000.00)($2,000.00)($1,000.00)$0.00$1,000.00$2,000.00$3,000.00$4,000.00$5,000.000%10%20%30%40%discount ratenpvproject aproject b10.55% = crossover rate12.94% = irrb16.04% = irramcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights re

20、served.6-16calculating the crossover ratecompute the irr for either project “a-b” or “b-a”year project a project b project a-b project b-a 0 ($10,000) ($10,000)$0$01$10,000$1,000$9,000($9,000)2$1,000$1,000$0$03$1,000$12,000($11,000)$11,000($3,000.00)($2,000.00)($1,000.00)$0.00$1,000.00$2,000.00$3,00

21、0.000%5%10%15%20%discount ratenpva-bb-a10.55% = irrmcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-17mutually exclusive vs. independent project mutually exclusive projects: only one of several potential projects can be chosen, e.g. acquiring an accounting sys

22、tem. rank all alternatives and select the best one. independent projects: accepting or rejecting one project does not affect the decision of the other projects. must exceed a minimum acceptance criteria.mcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-186.7 th

23、e profitability index (pi) rule minimum acceptance criteria: accept if pi 1 ranking criteria: select alternative with highest pi disadvantages: problems with mutually exclusive investments advantages: may be useful when available investment funds are limited easy to understand and communicate correc

24、t decision when evaluating independent projectsinvestent initialflowscash future of pv totalpi mcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-196.8 the practice of capital budgeting varies by industry: some firms use payback, others use accounting rate of re

25、turn. the most frequently used technique for large corporations is irr or npv.mcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-20example of investment rulescompute the irr, npv, pi, and payback period for the following two projects. assume the required return

26、is 10%. year project aproject b0-$200-$1501$200$502$800$1003-$800$150mcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-21example of investment rulesproject aproject bcf0-$200.00-$150.00pv0 of cf1-3$241.92$240.80npv =$41.92$90.80irr =0%, 100%36.19%pi =1.20961.60

27、53 mcgraw-hill/irwincopyright 2002 by the mcgraw-hill companies, inc. all rights reserved.6-22example of investment rulespayback period:project aproject btimecfcum. cfcfcum. cf0-200-200-150-1501200050-100280080010003-8000150150payback period for project b = 2 years.payback period for project a = 1 or 3