Chapter_12Making Sure Managers Maximize NPV(公司理财原理,Brealey Myers)概要1.ppt

Slides by Matthew Will Topics Covered The capital investment process Decision Makers and Information Incentives Residual Income and EVA Accounting Performance Measures Economic Profit The Principal Agent Problem Capital Investment Decision Off Budget Expenditures Information Technology Research and Development Marketing Training and Development Information Problems 1. Consistent Forecasts 2. Reducing Forecast Bias 3. Getting Senior Management Needed Information 4. Eliminating Conflicts of Interest Growth and Returns Brealey Myers Second Law The proportion of proposed projects having a positive NPV at the official corporate hurdle rate is independent of the hurdle rate. Incentives Reduced effort Perks Empire building Entrenching investment Avoiding risk Incentive Issues Monitoring - Reviewing the actions of managers and providing incentives to maximize shareholder value. Free Rider Problem - When owners rely on the efforts of others to monitor the company. Compensation - How to pay managers so as to reduce the cost and need for monitoring and to maximize shareholder value. Residual Income EVA Techniques for overcoming errors in accounting measurements of performance. Emphasizes NPV concepts in performance evaluation over accounting standards. Looks more to long term than short term decisions. More closely tracks shareholder value than accounting measurements. Residual Income EVA Residual Income EVA Residual Income EVA Residual Income EVA Economic Profit Economic Profit Message of EVA + Managers are motivated to only invest in projects that earn more than they cost. + EVA makes cost of capital visible to managers. + Leads to a reduction in assets employed. - EVA does not measure present value - Rewards quick paybacks and ignores time value of money EVA of US firms - 2000 Accounting Measurements Accounting Measurements Accounting Measurements Nodhead Store Forecastes Nodhead Book Income ROI 12- * McGraw Hill/Irwin Copyright ? 2003 by The McGraw-Hill Co