罗斯公司理财Chpt007.ppt

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1、CorporateFinanceRossWesterfieldJaffeSixthEditionSixthEdition7ChapterSevenNetPresentValueandCapitalBudgetingChapterOutline7.1IncrementalCashFlows7.2TheBaldwinCompany:AnExample7.3InflationandCapitalBudgeting7.4InvestmentsofUnequalLives:TheEquivalentAnnualCostMethod7.5Summa

2、ryandConclusions7.1IncrementalCashFlowsCashflowsmatter—notaccountingearnings.Sunkcostsdon’tmatter.Incrementalcashflowsmatter.Opportunitycostsmatter.Sideeffectslikecannibalismanderosionmatter.Taxesmatter:wewantincrementalafter-taxcashflows.Inflationmatters.CashFlows—NotAcco

3、untingEarnings.Considerdepreciationexpense.Youneverwriteacheckmadeoutto“depreciation”.Muchoftheworkinevaluatingaprojectliesintakingaccountingnumbersandgeneratingcashflows.IncrementalCashFlowsSunkcostsarenotrelevantJustbecause“wehavecomethisfar”doesnotmeanthatweshouldcontin

4、uetothrowgoodmoneyafterbad.Opportunitycostsdomatter.JustbecauseaprojecthasapositiveNPVthatdoesnotmeanthatitshouldalsohaveautomaticacceptance.SpecificallyifanotherprojectwithahigherNPVwouldhavetobepassedupweshouldnotproceed.Sideeffectsmatter.Erosionandcannibalismarebothbadt

5、hings.Ifournewproductcausesexistingcustomerstodemandlessofcurrentproducts,weneedtorecognizethat.EstimatingCashFlowsCashFlowsfromOperationsRecallthat:OperatingCashFlow=NetIncome+DepreciationNetCapitalSpendingDon’tforgetsalvagevalue(aftertax,ofcourse).ChangesinNetWorkingCapi

6、talRecallthatwhentheprojectwindsdown,weenjoyareturnofnetworkingcapital.InterestExpenseLaterchapterswilldealwiththeimpactthattheamountofdebtthatafirmhasinitscapitalstructurehasonfirmvalue.Fornow,it’senoughtoassumethatthefirm’slevelofdebt(henceinterestexpense)isindependentof

7、theprojectathand.7.2TheBaldwinCompany:AnExampleCostsoftestmarketing(alreadyspent):$250,000.Currentmarketvalueofproposedfactorysite(whichweown):$150,000.Costofbowlingballmachine:$100,000(depreciatedaccordingtoACRS5-yearlife).Increaseinnetworkingcapital:$10,000.Production(in

8、units)byyearduring5-yearlifeofthemachine:5,000,8,000,12,000,10,000,6,000.Priceduringfirst