__第七章 净现值和资本预算.ppt

Chapter Outline 7.1 Incremental Cash Flows 7.2 The Baldwin Company: An Example 7.3 Inflation and Capital Budgeting 7.4 Investments of Unequal Lives: The Equivalent Annual Cost Method 7.5 Summary and Conclusions 7.1 Incremental Cash Flows Cash flows matter—not accounting earnings. Sunk costs don’t matter. Incremental cash flows matter. Opportunity costs matter. Side effects like cannibalism and erosion matter. Taxes matter: we want incremental after-tax cash flows. Inflation matters. Cash Flows—Not Accounting Earnings. Consider depreciation expense. You never write a check made out to “depreciation”. Much of the work in evaluating a project lies in taking accounting numbers and generating cash flows. Incremental Cash Flows Sunk costs are not relevant Just because “we have come this far” does not mean that we should continue to throw good money after bad. Opportunity costs do matter. Just because a project has a positive NPV that does not mean that it should also have automatic acceptance. Specifically if another project with a higher NPV would have to be passed up we should not proceed. Side effects matter. Erosion and cannibalism are both bad things. If our new product causes existing customers to demand less of current products, we need to recognize that. Estimating Cash Flows Cash Flows from Operations Recall that: Operating Cash Flow = EBIT – Taxes + Depreciation Net Capital Spending Don’t forget salvage value (after tax, of course). Changes in Net Working Capital Recall that when the project winds down, we enjoy a return of net working capital. Interest Expense Later chapters will deal with the impact that the amount of debt that a firm has in its capital structure has on firm value. For now, it’s enough to assume that the firm’s level of debt (hence interest expense) is independent of the project at hand. 7.2 The Baldwin Company: An Example Costs of test marketing (already spent): $250,000. Current market value of proposed factory site (which we own): $150