微观经济学课件英文

1、Chapter 15Investment, Time, and Capital MarketsChapter 15Slide 2Topics to be DiscussedStocks Versus FlowsPresent Discounted ValueThe Value of a BondThe Net Present Value Criterion for Capital Investment DecisionsChapter 15Slide 3Topics to be DiscussedAdjustments for RiskInvestment Decisions by Consu

2、mersIntertemporal Production Decisions- Depletable ResourcesHow are Interest Rates Determined?Chapter 15Slide 4IntroductionCapitalChoosing an input that will contribute to output over a long period of timeComparing the future value to current expendituresChapter 15Slide 5Stocks Versus FlowsStockCapi

3、tal is a stock measurement.The amount of capital a company ownsChapter 15Slide 6Stocks Versus FlowsFlowsVariable inputs and outputs are flow measurements.An amount per time periodChapter 15Slide 7Present Discounted Value (PDV)Determining the value today of a future flow of eThe value of a future pay

4、ment must be discounted for the time period and interest rate that could be earned.Chapter 15Slide 8Present Discounted Value (PDV)Future Value (FV)Chapter 15Slide 9Present Discounted Value (PDV)QuestionWhat impact does R have on the PDV? PDV of $1 Paid in the Future0.01$0.990$0.980$0.951$0.905$0.820

5、$0.7420.02 0.980 0.961 0.906 0.820 0.673 0.5520.03 0.971 0.943 0.863 0.744 0.554 0.4120.04 0.962 0.925 0.822 0.676 0.456 0.3080.05 0.952 0.907 0.784 0.614 0.377 0.2310.06 0.943 0.890 0.747 0.558 0.312 0.174Interest Rate1 Year2 Years3 Years4 Years5 Years6 YearsPDV of $1 Paid in the Future0.07 0.935 0

6、.873 0.713 0.508 0.258 0.1310.08 0.926 0.857 0.681 0.463 0.215 0.0990.09 0.917 0.842 0.650 0.422 0.178 0.0750.10 0.909 0.826 0.621 0.386 0.149 0.0570.15 0.870 0.756 0.497 0.247 0.061 0.0150.20 0.833 0.694 0.402 0.162 0.026 0.004Interest Rate1 Year2 Years3 Years4 Years5 Years6 YearsChapter 15Slide 12

7、Present Discounted Value (PDV)Valuing Payment StreamsChoosing a payment stream depends upon the interest rate. Chapter 15Slide 13Two Payment StreamsPayment Stream A: $100$1000Payment Stream B:$20$100$100Today1 Year2 YearsChapter 15Slide 14Two Payment Streams Chapter 15Slide 15PDV of Payment StreamsP

8、DV of Stream A: $195.24$190.90$186.96$183.33PDV of Stream B:205.94193.54182.57172.77R = .05R = .10R = .15R = .20Why does the PDV of A relative to B increase as R increases and vice versa for B?Chapter 15Slide 16The Value of Lost EarningsPDV can be used to determine the value of lost e from a disabil

9、ity or death.Chapter 15Slide 17The Value of Lost EarningsScenarioHarold Jennings died in an auto accident January 1, 1986 at 53 years of age.Salary: $85,000Retirement Age: 60Chapter 15Slide 18The Value of Lost EarningsQuestionWhat is the PDV of Jennings lost e to his family?Must adjust salary for pr

10、edicted increase (g)Assume an 8% average increase in salary for the past 10 yearsChapter 15Slide 19The Value of Lost EarningsQuestionWhat is the PDV of Jennings lost e to his family?Must adjust for the true probability of death (m) from other causesDerived from mortality tablesChapter 15Slide 20The

11、Value of Lost EarningsQuestionWhat is the PDV of Jennings lost e to his family?Assume R = 9%Rate on government bonds in 1983Chapter 15Slide 21The Value of Lost Earnings Calculating Lost Wages1986$ 85,000.9911.000$84,235198791,800.990.91783,339198899,144.989.84282,5611989107,076.988.77281,6711990115,

12、642.987.70880,8101991124,893.986.65080,0431992134,884.985.59679,1851993145,675.984.54778,408YearW0(1 + g)t(1 - mt)1/(1 + R)tW0(1 + g)t(1 - mt)/(1 + R)tChapter 15Slide 23The Value of Lost EarningsFinding PDVThe summation of column 4 will give the PDV of lost wages ($650,252)Jennings family could reco

13、ver this amount as compensation for his death.Chapter 15Slide 24The Value of a BondDetermining the Price of a BondCoupon Payments = $100/yr. for 10 yrs.Principal Payment = $1,000 in 10 yrs. Chapter 15Slide 25Present Value ofthe Cash Flow from a BondInterest RatePDV of Cash Flow($ thousands)00.050.10

14、1.01.52.0Why does the value declineas the rate increases?Chapter 15Slide 26The Value of a BondPerpetuitiesPerpetuities are bonds that pay out a fixed amount of money each year, forever.Chapter 15Slide 27Effective Yield on a BondCalculating the Rate of Return From a BondChapter 15Slide 28E

15、ffective Yield on a BondCalculating the Rate of Return From a BondChapter 15Slide 29Effective Yield on a BondInterest Rate00.000.51.01.52.0PDV of Payments (Value of Bond)($ thousands)Why do yields differamong different bonds?The effective yield is the interestrate that equates the presen

16、tvalue of a bonds payment stream with the bonds market price.Chapter 15Slide 30The Yields on Corporate BondsIn order to calculate corporate bond yields, the face value of the bond and the amount of the coupon payment must be known.AssumeIBM and Polaroid both issue bonds with a face value of $100 and

17、 make coupon payments every six months.Chapter 15Slide 31The Yields on Corporate BondsClosing prices for each July 23, 1999:IBM 53/8 09 5.830 92 -11/2 Polaroid 111/2 0610.8 80 106 -5/8 a: coupon payments for one year ($5.375)b: maturity date of bond (2009)c: annual coupon/closing price ($5.375/92)d:

18、 number traded that day (30)e: closing price (92)f: change in price from previous day (-11/2) a b c d e fChapter 15Slide 32The Yields on Corporate BondsThe IBM bond yield:Assume annual payments2009 - 1999 = 10 yearsChapter 15Slide 33The Yields on Corporate BondsThe Polaroid bond yield:Why was Polaro

19、idR* greater?Chapter 15Slide 34The Net Present Value Criterionfor Capital Investment DecisionsIn order to decide whether a particular capital investment is worthwhile a firm should compare the present value (PV) of the cash flows from the investment to the cost of the investment.Chapter 15Slide 35NP

20、V CriterionFirms should invest if the PV exceeds the cost of the investment.The Net Present Value Criterionfor Capital Investment DecisionsChapter 15Slide 36 The Net Present Value Criterionfor Capital Investment DecisionsChapter 15Slide 37The Electric Motor Factory (choosing to build a $10 million f

21、actory)8,000 motors/ month for 20 yrsCost = $42.50 eachPrice = $52.50Profit = $10/motor or $80,000/monthFactory life is 20 years with a scrap value of $1 millionShould the company invest?The Net Present Value Criterionfor Capital Investment DecisionsChapter 15Slide 38Assume all information is certai

22、n (no risk)R = government bond rateThe Net Present Value Criterionfor Capital Investment DecisionsChapter 15Slide 39Net Present Value of a FactoryInterest Rate, R00.00-6Net Present Value($ millions)-4-20246810The NPV of a factory is the presentdiscounted value of all the cashflows involv

23、ed in building andoperating it.R* = 7.5Chapter 15Slide 40Real versus Nominal Discount RatesAdjusting for the impact of inflationAssume price, cost, and profits are in real termsInflation = 5%The Net Present Value Criterionfor Capital Investment DecisionsChapter 15Slide 41Real versus Nominal Discount

24、 RatesAssume price, cost, and profits are in real termsTherefore,P = (1.05)(52.50) = 55.13, Year 2 P = (1.05)(55.13) = 57.88.C = (1.05)(42.50) = 44.63, Year 2 C =.Profit remains $960,000/yearThe Net Present Value Criterionfor Capital Investment DecisionsChapter 15Slide 42Real versus Nominal Discount

25、 RatesReal R = nominal R - inflation = 9 - 5 = 4The Net Present Value Criterionfor Capital Investment DecisionsChapter 15Slide 43Net Present Value of a FactoryInterest Rate, R00.00-6Net Present Value($ millions)-4-20246810If R = 4%, the NPV ispositive. The companyshould invest inthe new

26、factory.Chapter 15Slide 44Negative Future Cash FlowsInvestment should be adjusted for construction time and losses.The Net Present Value Criterionfor Capital Investment DecisionsChapter 15Slide 45Electric Motor FactoryConstruction time is 1 year$5 million expenditure today$5 million expenditure next

27、 yearExpected to lose $1 million the first year and $0.5 million the second yearProfit is $0.96 million/yr. until year 20Scrap value is $1 millionThe Net Present Value Criterionfor Capital Investment DecisionsChapter 15Slide 46 The Net Present Value Criterionfor Capital Investment DecisionsChapter 1

28、5Slide 47Adjustments for RiskDetermining the discount rate for an uncertain environment:This can be done by increasing the discount rate by adding a risk-premium to the risk-free rate.Owners are risk averse, thus risky future cash flows are worth less than those that are certain.Chapter 15Slide 48Ad

29、justments for RiskDiversifiable Versus Nondiversifiable RiskDiversifiable risk can be eliminated by investing in many projects or by holding the stocks of many companies.Nondiversifiable risk cannot be eliminated and should be entered into the risk premium.Chapter 15Slide 49Adjustments for RiskMeasu

30、ring the Nondiversifiable Risk Using the Capital Asset Pricing Model (CAPM)Suppose you invest in the entire stock market (mutual fund)rm = expected return of the stock marketrf = risk free raterm - rf = risk premium for nondiversifiable risk Chapter 15Slide 50Adjustments for RiskMeasuring the Nondiv

31、ersifiable Risk Using the Capital Asset Pricing Model (CAPM)Calculating Risk Premium for One StockChapter 15Slide 51Adjustments for RiskQuestionWhat is the relationship between the nondiversifiable risk and the value of the asset beta?Chapter 15Slide 52Adjustments for RiskGiven beta, we can determin

32、e the correct discount rate to use in computing an assets net present value:Chapter 15Slide 53Adjustments for RiskDetermining betaStockEstimated statistically for each companyChapter 15Slide 54Adjustments for RiskDetermining betaFactoryWeighted average of expected return on the companys stock and th

33、e interest on the debtExpected return depends on betaCaution: The investment should be typical for the companyChapter 15Slide 55Investment Decisions by ConsumersConsumers face similar investment decisions when they purchase a durable good.Compare future benefits with the current purchase costChapter

34、 15Slide 56Benefits and Cost of Buying a CarS = value of transportation services in dollarsE = total operating cost/yrPrice of car is $20,000Resale value of car is $4,000 in 6 yearsInvestment Decisions by ConsumersChapter 15Slide 57Benefits and CostInvestment Decisions by ConsumersChapter 15Slide 58

35、Choosing an Air ConditionerBuying a new air conditioner involves making a trade-off.Air Conditioner ALow price and less efficient (high operating cost)Chapter 15Slide 59Choosing an Air ConditionerBuying a new air conditioner involves making a trade-off.Air Conditioner BHigh price and more efficientB

36、oth have the same cooling powerAssume an 8 year lifeChapter 15Slide 60Choosing an Air Conditioner Chapter 15Slide 61Choosing an Air ConditionerShould you choose A or B?Depends on the discount rateIf you borrow, the discount rate would be high Probably choose a less expensive and inefficient unitIf y

37、ou have plentiful cash, the discount rate would be low.Probably choose the more expensive unitChapter 15Slide 62Intertemporal ProductionDecisions-Depletable ResourcesFirms production decisions often have intertemporal aspects-production today affects sales or costs in the future.Chapter 15Slide 63Sc

38、enarioYou are given an oil well containing 1000 barrels of oil.MC and AC = $10/barrelShould you produce the oil or save it?Intertemporal ProductionDecisions-Depletable ResourcesChapter 15Slide 64ScenarioPt = price of oil this yearPt+1 = price of oil next yearC = extraction costsR = interest rate Int

39、ertemporal ProductionDecisions-Depletable ResourcesChapter 15Slide 65Do not produce if you expect its price less its extraction cost to rise faster than the rate of interest.Extract and sell all of it if you expect price less cost to rise at less than the rate of interest.What will happen to the pri

40、ce of oil?Intertemporal ProductionDecisions-Depletable ResourcesPrice of an Exhaustible ResourceTimePriceQuantityPriceccMarginal ExtractionCostTPTP0P - cP0DemandChapter 15Slide 67In a competitive market, Price - MC must rise at exactly the rate of interest.Why?How would producers react if:P - C incr

41、eases faster than R?P - C increases slower than R?Price of an Exhaustible ResourceChapter 15Slide 68NoticeP MCIs this a contradiction to the competitive rule that P = MC?Hint: What happens to the opportunity cost of producing an exhaustible resource?Price of an Exhaustible ResourceChapter 15Slide 69

42、P = MCMC = extraction cost + user costUser cost = P - marginal extraction costPrice of an Exhaustible ResourceChapter 15Slide 70How would a monopolist choose their rate of production?They will produce so that marginal revenue revenue less marginal cost rises at exactly the rate of interest, or(MRt+1

43、 - c) = (1 + R)(MRt - c)Price of an Exhaustible ResourceChapter 15Slide 71The monopolist is more conservationist than a competitive industry.They start out charging a higher price and deplete the resources more slowly.Price of an Exhaustible ResourceResource Production by a MonopolistChapter 15Slide

44、 72How Depletable AreDepletable Resources?Crude oil.4 to .5Natural gas.4 to .5Uranium.1 to .2Copper.2 to .3Bauxite.05 to .2Nickel.1 to .2Iron Ore.1 to .2Gold.05 to .1ResourceUser petitive PriceChapter 15Slide 73The market structure and changes in market demand have had a very dramatic impact on reso

45、urce prices over the past few decades.QuestionWhy would oil and natural gas have such a high user cost ratio compared to the other resources?How Depletable AreDepletable Resources?Chapter 15Slide 74How Are Interest Rates Determined?The interest rate is the price that borrowers pay lenders to use the

46、ir funds.Determined by supply and demand for loanable funds.Chapter 15Slide 75SHouseholds supply funds toconsume more in the future;the higher the interest rate, themore they supply.Supply and Demand for Loanable FundsQuantity ofLoanable FundsRInterestRateDTR*Q*DT = DH + DF andequilibrium interestra

47、te is R*.DHDFDH and DF, the quantity demanded for loanable funds by households (H)and firms, respectively, varies inverselywith the interest rate.Chapter 15Slide 76Changes In The EquilibriumSDTR*Q*During a recession interestrates fall due to adecrease in the demand for loanable funds.DTQ1R1Quantity ofLoanable FundsRInterestRateChapter 15Slide 77Changes In The EquilibriumSDTR*Q*When the federal government runs largebudget deficits the demand for loanablefunds increase.Q2R2DTQuantity ofLoanable Fun