公司理财讲义2分析.doc

Solutions to Chapter 10 Project Analysis 1. a. The capital budget mitigates the problem of overoptimism by project sponsors by awarding lower-level managers on the basis of net present value and contribution to value. b. The capital budget mitigates the problem of inconsistent forecasts of macroeconomic variables by establishing forecasts of economic indicators, both macro-level and business-specific, that are used in all project analyses. c. The capital budget mitigates the problem of a bottom-up process by reflecting both capital budgeting and strategic planning. Senior managers sometimes impose capital rationing, forcing subunits to choose among projects, or ask lower levels questions that identify the competitive advantage in each positive-NPV project. Est time: 01–05 2. The extra 2 million burgers increase total costs by $1.0 million. Therefore, variable cost = $0.50 per burger. Fixed costs must then be $2.5 million, since the first 2 million burgers result in a total cost of $3.5 million. Est time: 01–05 3. a. For production of 1 million burgers, fixed costs are $2.5 million. Variable costs = $0.50 ( 1,000,000 = $0.5 million Average cost = $3.00 million/1 million = $3.00/burger Average cost = $3.50 million/2 million = $1.75/burger The fixed costs are spread across more burgers—thus the average cost falls. Est time: 01–05 4. a. (Revenue – expenses) changes by $1 million – $0.5 million = $0.5 million. After-tax profits increase by $0.5 million ( (1 – 0.35) = $0.325 million. Because depreciation is unaffected, cash flow changes by the same amount.  Expenses increase from $5 million to $6.5 million. After-tax income and cash flow decrease by: $1.5 million ( (1 – 0.35) = $0.975 million Est time: 01–05 The 12%, 10-year annuity factor is: The effect on NPV equals the change in CF ( 5.65022. a. $0.325 million ( 5.65022 = $1.836 million $0.975 million ( 5.65022 = $5.509 million b. Fixed costs can increase up to the point at which the higher costs (a