FIB01AY10201_Chap006财务管理.ppt

Cheapskate EAC with a Calculator 5 –500 –2,895.39 –1,000 CF1 F1 CF0 I NPV 10 763.80 10 -2,895.39 5 PMT I/Y FV PV N PV Quick Quiz How do we determine if cash flows are relevant to the capital budgeting decision? What are the different methods for computing operating cash flow, and when are they important? How should cash flows and discount rates be matched when inflation is present? What is equivalent annual cost, and when should it be used? * * * * * * I heard a story about an undergrad at the University of Missouri-Rolla. A student named Louis abandoned college three credit hours shy of graduation. Really. Entreaties from his friends and parents regarding how far he had come and how hard he had worked could not change Louis’ mind. That was all a sunk cost to Louis. He already had a job and didn’t value the degree as much as the incremental work of an easy three-hour required class called ET-10 Engineering Drafting. Fifteen years later, he still has a good job, a great wife and two charming daughters. Louis taught us a lot about sunk costs. * * Of course, amortization could be included as well; however, the formula as presented is the typical statement. * It may be beneficial to note the separation theorem, i.e., financing and investment decisions are separate activities. Further, you can note that the discount rate captures these related issues. * See the text for the details of the case. * * * We assume that the ending market value of the capital investment at year 5 is $30,000. Capital gain is the difference between ending market value and adjusted basis of the machine. The adjusted basis is the original purchase price of the machine less depreciation. The capital gain is $24,240 (= $30,000 – $5,760). We will assume the incremental corporate tax for Baldwin on this project is 34 percent. Capital gains are now taxed at the ordinary income rate, so the capital gains tax due is $8,242 = [0.34 * ($30,000 – $5,760)]. The after-tax salvage value is $30,000 – 8,24