公司金融Chapteranalyzinginvestmentproject投资净现值分析.pptVIP

* * * * * * * * * * * * * * * * Mutually Exclusive vs. Independent Mutually Exclusive Projects: only ONE of several potential projects can be chosen, e.g., acquiring an accounting system. RANK all alternatives, and select the best one. Independent Projects: accepting or rejecting one project does not affect the decision of the other projects. Must exceed a MINIMUM acceptance criteria * * Case 1: IRR versus NPV Consider a project with the following cash flows: Year Cash Flow 0 -1000 1 800 2 1000 3 1300 4 -2200 Please calculate its IRR * * What do we do now? This project has two internal rates of return. The first is 6.60%, whereas the second is 36.55%. Why are there two internal rates of return on this project? If your cost of capital is 12.32%, would you accept or reject this project? I would reject the project I would accept this project Explain. * Case 2: Borrowing or Lending Project A： Project B： 0 1 -100 130 100 -130 IRR=30% NPV@10%=18.2 Discount rate30%, Accept project IRR=30% NPV@10%=-18.2 Discount rate30%，Reject project Lending Borrowing * * Case 3: The scale problem Cash Flow Investment $ 350,000 -$ 1,000,000 Project A Cash Flow Investment Project B NPV = $467,937 IRR= 33.66% $ 450,000 $ 600,000 $ 750,000 NPV = $1,358,664 IRR=20.88% -$ 10,000,000 $ 3,000,000 $ 3,500,000 $ 4,500,000 $ 5,500,000 * * Which one would you pick? Assume that you can pick only one of these two projects. Your choice will clearly vary depending upon whether you look at NPV or IRR. You have enough money currently on hand to take either. Which one would you pick? Project A. It gives me a higher rate of return. Project B. It creates more dollar value in my business. If you pick A, what would your biggest concern be? If you pick B, what would your biggest concern be? * * Capital Rationing, Uncertainty and Choosing a Rule If a business has limited access to capital, has a stream of