chapter 21--capital investment decisions

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1、CapitalInvestment501CHAPTER23CapitalInvestmentLEARNINGOBJECTIVESAfterstudyingthischapter,youshouldbeableto:1.Describethedifferencebetweenindependentandmutuallyexclusivecapitalinvestmentdecisions.2.Explaintherolesofthepaybackperiodandaccountingrateofreturnincapita

2、linvestmentdecisions.3.Calculatethenetpresentvalue(NPV)forindependentprojects.4.Computetheinternalrateofreturn(IRR)forindependentprojects.5.TellwhyNPVisbetterthanIRRforchoosingamongmutuallyexclusiveprojects.6.Convertgrosscashflowstoafter-taxcashflows.7.Describeca

3、pitalinvestmentforadvancedtechnologyandenvironmentalimpactsettings.CHAPTERSUMMARYThischapterdiscussesevaluationoflong-termcapitalinvestmentprojectsthatincludeindependentprojectsandmutuallyexclusiveprojects.Thenondiscountingmodelsanddiscountingmodelsarepresentedbe

4、causebothapproachesareusefulincapitalinvestmentanalysis.Theconceptsofpaybackperiod,accountingrateofreturn,internalrateofreturn,andnetpresentvaluearediscussedinrelationtocapitalbudgeting.Inevaluatingmutuallyexclusiveprojects,theNPVmodelcorrectlyidentifiesthebestin

5、vestmentalternativeand,thus,shouldbeused.Thischapterthenpresentshowtoproduceaccurateandreliablefuturecash-flowforecastswithinflationaryandtaxationadjustments.ThischapterconcludeswiththekeyconsiderationsinevaluatingcapitalinvestmentinadvancedtechnologyandP2project

6、s.LearningObjective#1CHAPTERREVIEWI.CapitalInvestmentDecisionsA.Introduction1.Capitalinvestmentdecisionsareconcernedwiththeprocessofplanning,settinggoalsandpriorities,arrangingfinancing,andusingcertaincriteriatoselectlong-termassets.2.Capitalinvestmentdecisionsar

7、eimportantbecause:a.Theyplacelargeamountsofresourcesatriskforlongperiodsoftimeandsimultaneouslyaffectthefuturedevelopmentofthefirm.CapitalInvestment501a.Firmshavelimitedresources.3.Theprocessofmakingcapitalinvestmentdecisionsisalsoreferredtoascapitalbudgeting.4.T

8、ypesofcapitalbudgetingprojectsinclude:a.Independentprojectsthat,ifacceptedorrejected,donotaffectthecashflowsofotherprojects.b.Mutuallyexclusiveprojectsthat,ifa