《公司金融》5 净现值和其他投资规则-英文教学课件（非AI生成）.ppt

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《公司金融》5 净现值和其他投资规则-英文教学课件（非AI生成）.ppt

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NetPresentValueandOtherInvestmentRulesChapter5

KeyConceptsandSkillsBeabletocomputenetpresentvalueandunderstandwhyitisthebestdecisioncriterionBeabletocomputepaybackandunderstandtheshortcomingBeabletocomputetheinternalrateofreturnandprofitabilityindex,understandingthestrengthsandweaknessesofbothapproaches

ChapterOutline5.1WhyUseNetPresentValue?5.2ThePaybackPeriodMethod5.3TheInternalRateofReturn5.4ProblemswiththeIRRApproach5.5TheProfitabilityIndex5.6ThePracticeofCapitalBudgeting

5.1WhyUseNetPresentValue?NPVrulecanbegeneralizedto:AcceptaprojectiftheNPVisgreaterthanzero.RejectaprojectifNPVislessthanzero.Whythemethodleadstogooddecisions?ThevalueofthefirmrisesbytheNPVoftheproject.AcceptingpositiveNPVprojectsbenefitsshareholders.Investinthefollowingproject

TheNetPresentValue(NPV)RuleNetPresentValue(NPV)=TotalPVoffutureCF’s+InitialInvestmentEstimatingNPV:1.Estimatefuturecashflows:howmuch?andwhen?2.Estimatediscountrate3.EstimateinitialcostsMinimumAcceptanceCriteria:AcceptifNPV0RankingCriteria:ChoosethehighestNPVNPVusescashflowsNPVusesallthecashflowsoftheprojectNPVdiscountsthecashflowsproperly

CalculatingNPVUsingtheNPVfunction:Thefirstcomponentistherequiredreturnenteredasadecimal.Thesecondcomponentistherangeofcashflowsbeginningwithyear1.AddtheinitialinvestmentaftercomputingtheNPV.

5.2ThePaybackPeriodMethodHowlongdoesittaketheprojectto“payback”itsinitialinvestment?PaybackPeriod=numberofyearstorecoverinitialcostsMinimumAcceptanceCriteria:SetbymanagementRankingCriteria:Setbymanagement

ThePaybackPeriodMethodDisadvantages:IgnoresthetimevalueofmoneyIgnorescashflowsafterthepaybackperiodBiasedagainstlong-termprojectsRequiresanarbitraryacceptancecriteriaAprojectacceptedbasedonthepaybackcriteriamaynot