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1、LEARNINGOBJECTIVESAfterstudyingthischapter,youshouldunderstand:LO1ThereasonswhythenetpresentNETPRESENTvaluecriterionisthebestwaytoevaluateproposedinvestments.LO2ThepaybackruleandsomeofitsVALUEANDshortcomings.9LO3Thediscountedpaybackruleandsomeofitsshortcomings.OTHERLO4Accountingrate
2、sofreturnandsomeoftheproblemswiththem.INVESTMENTLO5Theinternalrateofreturncriterionanditsstrengthsandweaknesses.CRITERIALO6Themodifiedinternalrateofreturn.LO7Theprofitabilityindexanditsrelationtonetpresentvalue.IN2008,THEAUTOMOBILEMANUFACTUR-pricetagofover$1billion,areobviouslymajorun
3、der-INGINDUSTRYinNorthAmericawasfacedwithtakings,andtherisksandrewardsmustbecarefullychronicovercapacity.Bysomeestimates,Generalweighed.Inthischapter,wediscussthebasictoolsMotorsmayhavehadasmanyas12factoriesmoreusedinmakingsuchdecisions.thanitneeded.ButnotallautomobilemanufacturersI
4、nChapter1,wesawthatincreasingthevalueoffacedthisproblem.Toyotaannouncedplansforitsthestockinacompanyisthegoaloffinancialman-eighthNorthAmericanassemblyplantinTupelo,agement.Thus,whatweneedtoknowishowtotellMississippi,a$1.3billion(projected)investment.Aboutwhetheraparticularinvestment
5、willachievethatorthesametime,Hondaannouncedplanstobuildanewnot.ThischapterconsidersavarietyoftechniquesplantinsouthernIndianaatacostof$550million,andthatareusedinpracticeforthispurpose.MoreBMWannouncedanexpansionofitsSpartanburg,important,itshowshowmanyofthesetechniquesSouthCarolina
6、,planttobuildthenewX6model.canbemisleading,anditexplainswhythenetpresentCapitalBudgetingPART4Toyota’snewplantisanexampleofacapitalbud-valueapproachistherightone.getingdecision.Decisionssuchasthisone,withaMastertheabilitytosolveproblemsinthischapterbyusingaspreadsheet.AccessExcelMast
7、eronthestudentWebsitewww.mhhe.com/rwj.InChapter1,weidentifiedthethreekeyareasofconcerntothefinancialmanager.Thefirstoftheseinvolvedtheques-tion:Whatfixedassetsshouldwebuy?Wecalledthisthecapitalbudgetingdecision.Inthischapter,webegintodealwiththeissuesthatariseinansweringthisquestion.The
8、processofallocating
