bma9e12 Investment, Strategy, and Economic Rents Principles of Corporate Finance 9th Edition 公司金融教学课件.pptVIP

Copyright ? 2008 by The McGraw-Hill Companies, Inc. All rights reserved 12- * McGraw Hill/Irwin Chapter 12 Principles of Corporate Finance Ninth Edition Investment, Strategy, and Economic Rents Slides by Matthew Will Copyright ? 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw Hill/Irwin Topics Covered Look First To Market Values Economic Rents and Competitive Advantage Example - Marvin Enterprises Market Values Smart investment decisions make MORE money than smart financing decisions Smart investments are worth more than they cost: they have positive NPVs Firms calculate project NPVs by discounting forecast cash flows, but . . . Market Values Projects may appear to have positive NPVs because of forecasting errorse.g. some acquisitions result from errors in a DCF analysis Positive NPVs stem from a comparative advantage Strategic decision-making identifies this comparative advantage; it does not identify growth areas Market Values Don’t make investment decisions on the basis of errors in your DCF analysis. Start with the market price of the asset and ask whether it is worth more to you than to others. Market Values Don’t assume that other firms will watch passively.Ask --How long a lead do I have over my rivals? What will happen to prices when that lead disappearsIn the meantime how will rivals react to my move? Will they cut prices or imitate my product? Department Store Rents [assumes price of property appreciates by 3% a year] Rental yield = 10 - 3 = 7% Department Store Rents EXAMPLE: KING SOLOMON’S MINE Investment = $200 million Life = 10 years Production = .1 million oz. a year Production cost = $200 per oz. Current gold price = $400 per oz. Discount rate = 10% Using Market Values EXAMPLE: KING SOLOMON’S MINE - continued If the gold price is forecasted to rise by 5% p.a.: But if gold is fairly priced, you do not need to forecast future gold prices: NPV = -investment +