金融学教学课件bodie2echapter06

1、1copyright 2009 pearson education, inc. publishing as prentice hall1objectiveexplain capital budgetingdevelop criteria2copyright 2009 pearson education, inc. publishing as prentice hall23copyright 2009 pearson education, inc. publishing as prentice hall3 coming up with proposals for investment proje

2、cts evaluating them deciding which ones to accept and which to reject4copyright 2009 pearson education, inc. publishing as prentice hall45copyright 2009 pearson education, inc. publishing as prentice hall56.1 the nature of project analysis6.2 where do investment ideas come from?6.3 the net present v

3、alue investment rule6.4 estimating a projects cash flows6.5 cost of capital6.6 sensitivity analysis using spreadsheets6.7 analyzing cost-reducing projects6.8 projects with different lives6.9 ranking mutually exclusive projects6.10 inflation & capital budgeting6copyright 2009 pearson education, inc.

4、publishing as prentice hall67copyright 2009 pearson education, inc. publishing as prentice hall78copyright 2009 pearson education, inc. publishing as prentice hall89copyright 2009 pearson education, inc. publishing as prentice hall910copyright 2009 pearson education, inc. publishing as prentice hall

5、10npv of a projectdiscout10%yearflowpvcum_pv0-1000-1000-10001450409-5912350289-3023250188-1144150102-115503120npv20 do project11copyright 2009 pearson education, inc. publishing as prentice hall11npv of a projectdiscout15%yearflowpvcum_pv0-1000-1000-10001450391-6092350265-3443250164-180415086-945502

6、5-69npv-69 dont do project12copyright 2009 pearson education, inc. publishing as prentice hall12npv of a projectdiscout11.04%yearflowpvcum_pv0-1000-1000-10001450405-5952350284-3113250183-128415099-30550300npv0 indifferent internal rate of return13copyright 2009 pearson education, inc. publishing as

7、prentice hall1314copyright 2009 pearson education, inc. publishing as prentice hall14npv as a function of discount rate-200-150-100-500501001502002500%5%10%15%20%discount ratenpv15copyright 2009 pearson education, inc. publishing as prentice hall1516copyright 2009 pearson education, inc. publishing

8、as prentice hall1617copyright 2009 pearson education, inc. publishing as prentice hall1718copyright 2009 pearson education, inc. publishing as prentice hall1819copyright 2009 pearson education, inc. publishing as prentice hall1920copyright 2009 pearson education, inc. publishing as prentice hall2021

9、copyright 2009 pearson education, inc. publishing as prentice hall2122copyright 2009 pearson education, inc. publishing as prentice hall2223copyright 2009 pearson education, inc. publishing as prentice hall23pcs forever is a company that produces personal computers. it has been in operation for two

10、years and is at capacity. it is considering an investment project to expand its production capacity. the project requires an initial outlay of $1,000,000: $800,000 for new equipment with an expected life of four years and $200,000 for additional working capital. the selling price of its pcs is $1,80

11、0 per unit, and annual sales are expected to increase by 1,000 units as a result of the proposed expansion. annual fixed costs (excluding depreciation of the new equipment) will increase by $100,000, and variable costs are $1,400 per unit. the new equipment will be depreciated over four years using

12、the straight line method with a zero salvage value. the hurdle rate for the project is 12% per year, and the company pays income tax at the rate of 40%. 24copyright 2009 pearson education, inc. publishing as prentice hall24 what is the accounting break-even point for this project? what is the projec

13、ts npv? at what volume of sales would the npv be zero? 25copyright 2009 pearson education, inc. publishing as prentice hall2526illustration of point 1 a firm whose average cost of capital for its existing assets is 16% per year gets an opportunity to purchase riskless u.s. t-bonds at below-market pr

14、ices. suppose that 25-year u.s. t-bonds paying $100 per year are selling in the market at $1000, and the firm could buy $1 million worth of these bonds for $950 each. if these cash flows are discounted at the firms cost of capital 16% per year, the present value of each bond is $634, and the npv of

15、the project would be -$315,830, which means it should be rejected.common sense: you can buy something for $950 and sell it immediately for $1,000, would you do it?27copyright 2009 pearson education, inc. publishing as prentice hall27could we use 6% as the cost of capital in computing the npv of the

16、pc1000 project? if could, dell would actually be able to do almost any projects, because of a super-low cost of capital; and all these projects cost of capital would be identically 6%!28copyright 2009 pearson education, inc. publishing as prentice hall2829copyright 2009 pearson education, inc. publi

17、shing as prentice hall2930copyright 2009 pearson education, inc. publishing as prentice hall30tax rate40.00%unit sales in year 1$4,000sales growth rate0.00%unit price$5,000unit price growth0.00%fixed start3,100,000fixed growth0.00%variable pcent75.00%depreciation schedule400,000npv =1236start workin

18、g capt2,200,000investment schedule2,800,000capital movements sch0dividend1,000,000working cap sch2,200,000year01234567cf forecastsales revenue20,00020,00020,00020,00020,00020,00020,000expensesfixed costs (cash)3,1003,1003,1003,1003,1003,1003,100variable costs15,00015,00015,00015,00015,00015,00015,00

19、0depreciation400400400400400400400operating profit1,5001,5001,5001,5001,5001,5001,500taxes600600600600600600600net profit900900900900900900900operating cf1,3001,3001,3001,3001,3001,3001,300working cap move2200-2,200investment in p&e2,800000000invest cf5,000000000-2,200net cf-5,0001,3001,3001,3001,30

20、01,3001,3003,500pv(ncf)-50001130983855743646562131631copyright 2009 pearson education, inc. publishing as prentice hall3132copyright 2009 pearson education, inc. publishing as prentice hall32assumptions(table in $000)cost of capital15.00%tax rate40.00%unit sales in year 1$4,000sales growth rate2.00%

21、unit price$5,000unit price growth-3.00%fixed start3,100,000fixed growth8.00%variable pcent75.00%depreciation schedule400,000npv =-797start working capt2,200,000investment schedule2,800,000capital movements sch0dividend1,000,000working cap sch2,200,000year01234567cf forecastsales revenue20,00019,7881

22、9,57819,37119,16518,96218,761expensesfixed costs (cash)3,1003,3483,6163,9054,2184,5554,919variable costs15,00014,84114,68414,52814,37414,22214,071depreciation400400400400400400400operating profit1,5001,199879538174-214-629taxes60048035121570-86-252net profit900719527323104-129-377operating cf1,3001,

23、11992772350427123working cap move2200-2,200investment in p&e2,800000000invest cf5,000000000-2,200net cf-5,0001,3001,1199277235042712,223pv(ncf)-5000113084661041325111783633copyright 2009 pearson education, inc. publishing as prentice hall3334copyright 2009 pearson education, inc. publishing as prent

24、ice hall34assumptions(table in $000)cost of capital25.00%tax rate40.00%unit sales in year 1$4,000sales growth rate0.00%unit price$5,000unit price growth0.00%fixed start3,100,000fixed growth0.00%variable pcent75.00%depreciation schedule400,000npv =-429start working capt2,200,000investment schedule2,8

25、00,000capital movements sch0dividend1,000,000working cap sch2,200,000year01234567cf forecastsales revenue20,00020,00020,00020,00020,00020,00020,000expensesfixed costs (cash)3,1003,1003,1003,1003,1003,1003,100variable costs15,00015,00015,00015,00015,00015,00015,000depreciation400400400400400400400ope

26、rating profit1,5001,5001,5001,5001,5001,5001,500taxes600600600600600600600net profit900900900900900900900operating cf1,3001,3001,3001,3001,3001,3001,300working cap move2200-2,200investment in p&e2,800000000invest cf5,000000000-2,200net cf-5,0001,3001,3001,3001,3001,3001,3003,500pv(ncf)-5000104083266

27、6532426341734was 15%35copyright 2009 pearson education, inc. publishing as prentice hall35assumptions(table in $000)cost of capital15.00%tax rate30.00%unit sales in year 1$4,000sales growth rate0.00%unit price$5,000unit price growth0.00%fixed start3,100,000fixed growth0.00%variable pcent75.00%deprec

28、iation schedule400,000npv =1860start working capt2,200,000investment schedule2,800,000capital movements sch0dividend1,000,000working cap sch2,200,000year01234567cf forecastsales revenue20,00020,00020,00020,00020,00020,00020,000expensesfixed costs (cash)3,1003,1003,1003,1003,1003,1003,100variable cos

29、ts15,00015,00015,00015,00015,00015,00015,000depreciation400400400400400400400operating profit1,5001,5001,5001,5001,5001,5001,500taxes450450450450450450450net profit1,0501,0501,0501,0501,0501,0501,050operating cf1,4501,4501,4501,4501,4501,4501,450working cap move2200-2,200investment in p&e2,800000000

30、invest cf5,000000000-2,200net cf-5,0001,4501,4501,4501,4501,4501,4503,650pv(ncf)-5000126110969538297216271372was 40%36copyright 2009 pearson education, inc. publishing as prentice hall36assumptions(table in $000)cost of capital15.00%tax rate40.00%unit sales in year 1$4,000sales growth rate5.00%unit

31、price$5,000unit price growth0.00%fixed start3,100,000fixed growth0.00%variable pcent75.00%depreciation schedule400,000npv =2885start working capt2,200,000investment schedule2,800,000capital movements sch0dividend1,000,000working cap sch2,200,000year01234567cf forecastsales revenue20,00021,00022,0502

32、3,15324,31025,52626,802expensesfixed costs (cash)3,1003,1003,1003,1003,1003,1003,100variable costs15,00015,75016,53817,36418,23319,14420,101depreciation400400400400400400400operating profit1,5001,7502,0132,2882,5782,8813,200taxes6007008059151,0311,1531,280net profit9001,0501,2081,3731,5471,7291,920o

33、perating cf1,3001,4501,6081,7731,9472,1292,320working cap move2200-2,200investment in p&e2,800000000invest cf5,000000000-2,200net cf-5,0001,3001,4501,6081,7731,9472,1294,520pv(ncf)-500011301096105710149689201699was 0%37copyright 2009 pearson education, inc. publishing as prentice hall37assumptions(t

34、able in $000)cost of capital15.00%tax rate40.00%unit sales in year 1$4,000sales growth rate0.00%unit price$5,000unit price growth0.00%fixed start3,100,000fixed growth0.00%variable pcent85.00%depreciation schedule400,000npv =-3757start working capt2,200,000investment schedule2,800,000capital movement

35、s sch0dividend1,000,000working cap sch2,200,000year01234567cf forecastsales revenue20,00020,00020,00020,00020,00020,00020,000expensesfixed costs (cash)3,1003,1003,1003,1003,1003,1003,100variable costs17,00017,00017,00017,00017,00017,00017,000depreciation400400400400400400400operating profit-500-500-

36、500-500-500-500-500taxes-200-200-200-200-200-200-200net profit-300-300-300-300-300-300-300operating cf100100100100100100100working cap move2200-2,200investment in p&e2,800000000invest cf5,000000000-2,200net cf-5,0001001001001001001002,300pv(ncf)-5000877666575043865was 75%38copyright 2009 pearson edu

37、cation, inc. publishing as prentice hall38assumptions(table in $000)cost of capital15.00%tax rate40.00%unit sales in year 1$4,000sales growth rate0.00%unit price$5,000unit price growth0.00%fixed start3,500,000fixed growth0.00%variable pcent75.00%depreciation schedule400,000npv =237start working capt

38、2,200,000investment schedule2,800,000capital movements sch0dividend1,000,000working cap sch2,200,000year01234567cf forecastsales revenue20,00020,00020,00020,00020,00020,00020,000expensesfixed costs (cash)3,5003,5003,5003,5003,5003,5003,500variable costs15,00015,00015,00015,00015,00015,00015,000depre

39、ciation400400400400400400400operating profit1,1001,1001,1001,1001,1001,1001,100taxes440440440440440440440net profit660660660660660660660operating cf1,0601,0601,0601,0601,0601,0601,060working cap move2200-2,200investment in p&e2,800000000invest cf5,000000000-2,200net cf-5,0001,0601,0601,0601,0601,060

40、1,0603,260pv(ncf)-50009228026976065274581226was $3,100,00039copyright 2009 pearson education, inc. publishing as prentice hall3940copyright 2009 pearson education, inc. publishing as prentice hall4041copyright 2009 pearson education, inc. publishing as prentice hall41sales unitsnet cf operationsnpv

41、project200020000050050223000550000188470836041003009040001300000123560750002050000435592260002800000747623742copyright 2009 pearson education, inc. publishing as prentice hall42sensitivity of project to sale volume$500,000$0$500,000$1,000,000$1,500,000$2,000,000$2,500,000$3,000,000$2,000$2,500$3,000

42、$3,500$4,000$4,500$5,000$5,500$6,000sales (units)net cf from operations43copyright 2009 pearson education, inc. publishing as prentice hall43npv project$6,000,000$4,000,000$2,000,000$0$2,000,000$4,000,000$6,000,000$8,000,000$10,000,000200025003000350040004500500055006000sales (units)npv44copyright 2

43、009 pearson education, inc. publishing as prentice hall4445copyright 2009 pearson education, inc. publishing as prentice hall4546copyright 2009 pearson education, inc. publishing as prentice hall4647copyright 2009 pearson education, inc. publishing as prentice hall47a firm is considering investing $

44、10 million in equipment which is expected to have a useful life of four years and is expected to reduce the firms labor costs by $4 million per year. assume the firm pays a 40% tax rate on accounting profits and uses the straight line depreciation method. what is the after-tax cash flow from the inv

45、estment in years 1 through 4? if the firms hurdle rate for this investment is 15% per year, is it worthwhile? what are the investments irr and npv? 48copyright 2009 pearson education, inc. publishing as prentice hall4849copyright 2009 pearson education, inc. publishing as prentice hall49example 6: electricity, inc. is choosing between two pieces of equipment. the first choice costs $500,000 and will last five years. it wil