公司理财培训教案.ppt

Chapter 3 capital budgeting techniques 3.1 capital budgeting technique Capital budgeting: The process of decision making with respect to investment in fixed assets. that is, should a proposed project be accepted or should it be rejected? 3.1 capital budgeting technique Objective of capital budgeting is to Marxism the value of corporate. Capital budgeting need to answer two basic questions: which project should be selected to invest? How many projects should be accepted ? 3.1 capital budgeting technique We have to settle the following problems to answer preceding questions: Estimating cash flow; Evaluating capital investment proposals; Analyzing risk of investment project and adjusting risk; 3.1 capital budgeting technique In deciding whether to accept a new project, we will focus on cash flow. cash flow represent the benefits generating from accepting a capital-budgeting proposal. In this chapter, we will assume a given cash flow is generating by a project and work on determining whether that projects should be accepted. 3.1 capital budgeting technique Capital budgeting decision criteria commonly used criteria: Payback period Discounted payback period Net present value Internal rate of return Profitability index Modified rate of return 3.1 capital budgeting technique Payback period A capital budgeting criterion defined as the number of years required to cover the initial cash flow. Accepted criteria: accepted the project whose payback period is the shortest. 3.1 capital budgeting technique Calculating payback period: 3.1 capital budgeting technique The characteristics of payback period: Advantages: Easy to be calculated; Disadvantages: Ignoring time value of money; Disregard of cash flow distribution; 3.1 capital budgeting technique Discounted payback period A variation of the payback period defined as the number of years required to cover the initial cash outlays from the discounted net cash flow. 3.1 capital budgeting technique Calculating discounted pay