1、6-16-2u Payback Period(PBP投资回收期投资回收期)u Internal Rate of Return(IRR内含报酬率内含报酬率)u Net Present Value(NPV净现值净现值)u Profitability Index(PI获利指数获利指数)6-3Julie Miller is evaluating a new project for her firm,Basket Wonders(BW).She has determined that the after-tax cash flows for the project will be$10,000;$12,
2、000;$15,000;$10,000;and$7,000,respectively,for each of the Years 1 through 5.The initial cash outlay will be$40,000.6-4-A project whose acceptance(or rejection)does not prevent the acceptance of other projects under consideration.uFor this project,assume that it is independent of any other potential
3、 projects that Basket Wonders may undertake.6-5 is the period of time required for the cumulative expected cash flows from an investment project to equal the initial cash outflow.0 1 2 3 4 5 -40 K 10 K 12 K 15 K 10 K 7 K6-6(c)10 K 22 K 37 K 47 K 54 K=a+(b-c)/d=3+(40-37)/10=3+(3)/10=0 1 2 3 4 5 -40 K
4、 10 K 12 K 15 K 10 K 7 KCumulativeInflows(a)(-b)(d)6-7=3+(3K)/10K=Note:Take absolute value of last negative cumulative cash flow value.CumulativeCash Flows -40 K 10 K 12 K 15 K 10 K 7 K0 1 2 3 4 5-40 K -30 K -18 K -3 K 7 K 14 K6-8Yes!The firm will receive back the initial cash outlay in less than 3.
5、5 years.3.3 Years 3.5 Year Max.The management of Basket Wonders has set a maximum PBP of 3.5 years for projects of this type.Should this project be accepted?6-9u Easy to use and understandu Can be used as a measure of liquidityu Does not account for TVMu Does not consider cash flows beyond the PBPu
6、6-10IRR is the discount rate that equates the present value of the future net cash flows from an investment project with the projects initial cash outflow.CF1 CF2 CFn(1+IRR)1 (1+IRR)2 (1+IRR)n+.+ICO=6-11$15,000$10,000$7,000$10,000$12,000(1+IRR)1 (1+IRR)2Find the interest rate(IRR)that causes the dis
7、counted cash flows to equal$40,000.+$40,000=(1+IRR)3 (1+IRR)4 (1+IRR)56-12=$10,000(PVIF10%,1)+$12,000(PVIF10%,2)+$15,000(PVIF10%,3)+$10,000(PVIF10%,4)+$7,000(PVIF10%,5)=$10,000(.909)+$12,000(.826)+$15,000(.751)+$10,000(.683)+$7,000(.621)=$9,090+$9,912+$11,265+$6,830+$4,347 =6-13=$10,000(PVIF15%,1)+$
8、12,000(PVIF15%,2)+$15,000(PVIF15%,3)+$10,000(PVIF15%,4)+$7,000(PVIF15%,5)=$10,000(.870)+$12,000(.756)+$15,000(.658)+$10,000(.572)+$7,000(.497)=$8,700+$9,072+$9,870+$5,720+$3,479 =6-14.10$41,444.05IRR$40,000$4,603.15$36,841($1,444)(0.05)$4,603$1,444XX=X=.0157IRR=.10+.0157=.1157 or 11.57%X/.05=1444/46
9、036-15 No!The firm will receive 11.57%for each dollar invested in this project at a cost of 13%.IRR Hurdle Rate The management of Basket Wonders has determined that the hurdle rate is 13%for projects of this type.Should this project be accepted?6-16u Accounts for TVMu Considers all cash flowsu Less
10、subjectivityu Assumes all cash flows reinvested at the IRRu Difficulties with project rankings and Multiple IRRs6-17 NPV is the present value of an investment projects net cash flows minus the projects initial cash outflow.CF1 CF2 CFn(1+k)1 (1+k)2 (1+k)n+.+-NPV=6-18Basket Wonders has determined that
11、 the appropriate discount rate(k)for this project is 13%.$10,000$7,000$10,000$12,000$15,000(1.13)1 (1.13)2 (1.13)3+-(1.13)4 (1.13)5=+6-19=$10,000(PVIF13%,1)+$12,000(PVIF13%,2)+$15,000(PVIF13%,3)+$10,000(PVIF13%,4)+$7,000(PVIF13%,5)-=$10,000(.885)+$12,000(.783)+$15,000(.693)+$10,000(.613)+$7,000(.543
12、)-=$8,850+$9,396+$10,395+$6,130+$3,801-=-6-20 No!The NPV is negative.This means that the project is reducing shareholder wealth.as The management of Basket Wonders has determined that the required rate is 13%for projects of this type.Should this project be accepted?6-21 u Cash flows assumed to be re
13、invested at the hurdle rate.u Accounts for TVM.u Considers all cash flows.u May not include managerial options embedded in the project.See Chapter 14.6-22Discount Rate(%)0 3 6 9 12 15IRRNPV13%Sum of CFsPlot NPV for eachdiscount rate.Three of these points are easy now!Net Present Value$000s151050-46-
14、23 PI is the ratio of the present value of a projects future net cash flows to the projects initial cash outflow.CF1 CF2 CFn(1+k)1 (1+k)2 (1+k)n+.+PI=PI=1+/Method#2:Method#1:6-24 No!The is less than 1.00.This means that the project is not profitable.as =$38,572/$40,000=.9643(Method#1,13-34)Should th
15、is project be accepted?6-25Same as NPVu Allows comparison of different scale projectsSame as NPVu Provides only relative profitabilityu Potential Ranking Problems6-26Method Project Comparison Decision PBP 3.3 3.5 Accept IRR 11.47%13%Reject NPV-$1,424$0 Reject PI.96 1.00 Reject Basket Wonders Indepen
16、dent Project6-27-A project whose acceptance precludes the acceptance of one or more alternative projects.-A project whose acceptance depends on the acceptance of one or more other projects.6-28 Ranking of project proposals may create contradictory results.6-29 Compare a small(S)and a large(L)project
17、.NET CASH FLOWSProject S Project LEND OF YEAR 0 -$100 -$100,000 1 0 0 2$400$156,2506-30Calculate the PBP,IRR,NPV10%,and PI10%.Which project is preferred?Why?Project IRR NPV PI S 100%$231 3.31 L 25%$29,132 1.296-31Let us compare a decreasing cash-flow(D)project and an increasing cash-flow(I)project.N
18、ET CASH FLOWSProject D Project IEND OF YEAR 0 -$1,200 -$1,200 1 1,000 100 2 500 600 3 100 1,0806-32 D 23%I 17%Calculate the IRR,NPV10%,and PI10%.Which project is preferred?Project IRR NPV PI6-33Discount Rate(%)0 5 10 15 20 25-200 0 200 400 600IRRNPV10%Plot NPV for eachproject at variousdiscount rate
19、s.Net Present Value($)6-34Discount Rate($)0 5 10 15 20 25-200 0 200 400 600Net Present Value($)6-35 Let us compare a long life(X)project and a short life(Y)project.NET CASH FLOWSProject X Project YEND OF YEAR 0 -$1,000 -$1,000 1 0 2,000 2 0 0 3 3,375 06-36 X 50%$1,536 2.54 Y 100%$818 1.82Calculate t
20、he PBP,IRR,NPV10%,and PI10%.Which project is preferred?Why?Project IRR NPV PI6-371.Adjust cash flows to a common terminal year if project“Y”will be replaced.Compound Project Y,Year 1 10%for 2 years.Year 0 1 2 3CF -$1,000$0$0$2,420Results:IRR*=34.26%NPV=$818*Lower IRR from adjusted cash-flow stream.X
21、 is still Best.6-382.Use Replacement Chain Approach(Appendix B)when project“Y”will be replaced.0 1 2 3Results:IRR=100%=*Higher NPV,but the same IRR.6-39Capital Rationing occurs when a constraint(or budget ceiling)is placed on the total size of capital expenditures during a particular period.（对总支出有限制
22、）对总支出有限制）Example:Julie Miller must determine what investment opportunities to undertake for Basket Wonders(BW).She is limited to a maximum expenditure of$32,500 only for this capital budgeting period.6-40 Project ICO IRR NPV PIA$500 18%$50 1.10 B 5,000 25 6,500 2.30 C 5,000 37 5,500 2.10 D 7,500 20
23、5,000 1.67 E12,500 26 500 1.04 F15,000 28 21,000 2.40 G17,500 19 7,500 1.43 H25,000 15 6,000 1.246-41 Project ICO IRR NPV PIC$5,00037%$5,500 2.10 F15,000 28 21,000 2.40 E12,50026 500 1.04 B 5,00025 6,500 2.30 Projects C,F,and E have the three largest IRRs.The resulting increase in shareholder wealth
24、 is$27,000 with a$32,500 outlay.6-42 Project ICO IRR NPV PI F$15,000 28%$21,000 2.40 G17,50019 7,500 1.43 B 5,00025 6,500 2.30Projects F and G have the two largest NPVs.The resulting increase in shareholder wealth is$28,500 with a$32,500 outlay.6-43 Project ICO IRR NPV PI F$15,000 28%$21,000 2.40B 5
25、,000 25 6,500 2.30 C 5,000 37 5,500 2.10 D 7,500 20 5,000 1.67 G 17,500 19 7,500 1.43Projects F,B,C,and D have the four largest PIs.The resulting increase in shareholder wealth is$38,000 with a$32,500 outlay.6-44 Method Projects Accepted Value Added PI F,B,C,and D$38,000 NPV F and G$28,500 IRRC,F,and E$27,000 generates the in when a limited capital budget exists for a single period.谢谢
