Principles of Managerial Finance9th Edition课件.pptVIP

Principles of Managerial Finance9th Edition Chapter 10 Learning Objectives Understand the importance of explicitly recognizing risk in the analysis of capital budgeting projects. Discuss breakeven cash flow, sensitivity and scenario analysis, and simulation as behavioral approaches for dealing with risk, and the unique risks facing multinational companies. Describe the two basic risk-adjustment techniques in terms of NPV and the procedures for applying the certainty equivalent (CE) approach. In the context of the capital budgeting projects discussed in this chapter, risk results almost entirely from the uncertainty about future cash inflows because the initial cash outflow is generally known. These risks result from a variety of factors including uncertainty about future revenues, expenditures and taxes. Therefore, to asses the risk of a potential project, the analyst needs to evaluate the riskiness of the cash inflows. Simulation is a statistically-based behavioral approach that applies predetermined probability distributions and random numbers to estimate risky outcomes. Figure 10.1 presents a flowchart of the simulation of the NPV of a project. The use of computers has made the use of simulation economically feasible, and the resulting output provides an excellent basis for decision-making. As noted in Chapter 6, individual investors must hold diversified portfolios because they are not rewarded for assuming diversifiable risk. Because business firms can be viewed as portfolios of assets, it would seem that it is also important that they too hold diversified portfolios. Surprisingly, however, empirical evidence suggests that firm value is not affected by diversification. In other words, diversification is not normally rewarded and therefore is generally not necessary. * Risk Refinements in Capital Budgeting Learning Objectives Review the use of risk-adjusted discount rates (RADRs), portfolio effects, and the practical aspects of RADRs relative to CEs. Recognize