公司理财(双语)npv

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1、WhyNetPresentValueLeadstoBetterInvestmentDecisionsthanOtherCriteriaCorporateFinanceChapter9McGrawHill/IrwinTopicsCoveredNPVanditsCompetitorsThePaybackPeriodTheAverageAccountingReturnInternalRateofReturnCapitalRationingCFODecisionToolsSurveyDataonCFOUs

2、eofInvestmentEvaluationTechniquesSOURCE:GrahamandHarvey,“TheTheoryandPracticeofFinance:EvidencefromtheField,”JournalofFinancialEconomics61(2001),pp.187-243.GoodDecisionCriteriaWeneedtoaskourselvesthefollowingquestionswhenevaluatingcapitalbudgetingdeci

3、sionrules:Doesthedecisionruleadjustforthetimevalueofmoney?Doesthedecisionruleadjustforrisk?Doesthedecisionruleprovideinformationonwhetherwearecreatingvalueforthefirm?9-4NetPresentValueThedifferencebetweenthemarketvalueofaprojectanditscost.NetPresentVa

4、lue(NPV)=﹣InitialInvestment+TotalPVoffutureCF’s9-5NPV–DecisionRuleEstimatingNPV:1.Estimatefuturecashflows:howmuch?andwhen?2.Estimatediscountrate3.EstimateinitialcostsNPV–DecisionRuleIftheNPVispositive,accepttheprojectApositiveNPVmeansthattheprojectise

5、xpectedtoaddvaluetothefirmandwillthereforeincreasethewealthoftheowners.Sinceourgoalistoincreaseownerwealth,NPVisadirectmeasureofhowwellthisprojectwillmeetourgoal.9-7NPV–DecisionRuleMinimumAcceptanceCriteria:AcceptifNPV>0RankingCriteria:Choosethehighes

6、tNPVExample9.1seepage263PaybackThepaybackperiodofaprojectisthenumberofyearsittakesbeforethecumulativeforecastedcashflowequalstheinitialoutlay.Thepaybackrulesaysonlyacceptprojectsthat“payback”inthedesiredtimeframe.Thismethodisveryflawed,primarilybecaus

7、eitignoreslateryearcashflowsandthethepresentvalueoffuturecashflows.PaybackExampleExaminethethreeprojectsandnotethemistakewewouldmakeifweinsistedononlytakingprojectswithapaybackperiodof2yearsorless.PaybackExampleExaminethethreeprojectsandnotethemistake

8、wewouldmakeifweinsistedononlytakingprojectswithapaybackperiodof2yearsorless.DecisionCriteriaTest-PaybackDoesthepaybackruleaccountforthetimevalueofmoney?Doesthepaybackruleaccountfortheriskofthecashflows?Doesthepaybackruleprovideanindicationabou