BUSINESS FINANCE教学资料 Tutorial for Week 9.pptxVIP

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2018-01-15 发布于浙江
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BUSINESS FINANCE教学资料 Tutorial for Week 9.pptx

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Net Present Value other Investment Criteria Chapter 8 of HillierWaquar AhmadProblem 1Consider the following two mutually exclusive projects:Whichever project you choose, if any, you require a 15 per cent return on your investment.which project would you choose based on:PBP; (b) DPBP; (c) NPV; (d) IRR; (e) PI(f) Final choice? Why?(g) What if the projects were independent?PBP?A: 3 + (180,000/390,000) = 3.46 years?B: 2 + (9,000/18,000) = 2.50 yearsThe payback criterion implies accepting project B, because it pays back sooner than project A.Discounted PBPA: 20,000/1.15 + 50,000/1.152 + 50,000/1.153 = 88,074.30 390,000/1.154 = 222,983.77Discounted PBP = 3 + (300,000 – 88,074.30)/222,983.77 = 3.95 yearsB: 19,000/1.15 + 12,000/1.152 + 18,000/1.153 = 37,430.76 10,500/1.154 = 6,003.41Discounted PBP = 3 + (40,000 – 37,430.76)/6,003.41 = 3.43 years?The discounted payback criterion implies accepting project B because it pays back sooner than ANPVNPVA = –300,000 + 20,000/1.15 + 50,000/1.152 + 50,000/1.153 + 390,000/1.154 = 11,058.07 NPVB = –40,000 + 19,000/1.15 + 12,000/1.152 + 18,000/1.153 + 10,500/1.154 = 3,434.16NPV criterion implies we accept project A because project A has a higher NPV than project B.Interpolation of IRRTo calculate IRR you must usually find a rate of return that generates a positive NPV and one that generates a negative NPV and use interpolationLet’s see an example…Assume that you calculate the NPV for one project. First you use a discount rate of 10%, and you find a NPV of ￡50,000. Then you use a discount rate of 20% and you find a NPV of -￡5,000.So, the discount rate for which NPV=0, is between 10% and 20%. Let’s see how we can calculate an approximation of the rate. Interpolation of IRRIRRA: 300,000 = 20,000/(1+IRR) + 50,000/(1+IRR)2 + 50,000/(1+IRR)3 + 390,000/(1+IRR)4 Try 20% and then …IRRA = 16.20%B: 40,000 = 19,000/(1+IRR) + 12,000/(1+IRR)2 + 18,000/(1+IRR)3 +10,500/(1+IRR)4 Try 20% and then …IRRB = 19.50%PIPIA = (20,000/1.15 + 50,000/1