经管学会网盘公财corporate finance group

1、RRI,VPNReal-life TASKWE： 张苏秦 郑迪心 丁 晖 石谷雨 王博文 陈志浩 侯志腾investmentstockpensionReviewPart One1Part Three3Part Four4Part Two2Q0Enter k, Enter NPV=0, # Investment Proposal: a concession stand (3 yrs left)# Discount rate: 15%Q1INCREMENTAL CASH FLOWSProjectInvestmentYear1Year2Year3Add a new window-$75,000$44

2、,000 $44,000 $44,000 Update existing equipment-50,000 23,000 23,000 23,000 Build a new stand-125,000 70,000 70,000 70,000 Rent a larger stand-1,000 12,000 13,000 14,000 # Q1.1: proposal decision? ( IRR/NPV)# Q1.2: explanation of differences； NPV/IRR, which rule is better?Q1.1Project1234IRRAdd-$75$44

3、$44$440.35Update-502323230.18Build-1257070700.31Rent-112131412.08Q1.1Project1234IRRNPVAdd-$75$44$44$440.3525.5Update-502323230.182.5Build-1257070700.3134.8Rent-112131412.0828.5Q1.2Q1+Q1+Q1+#Problem IRR Reinvestment Rate Assumption ( e.g. project 4)-$1,000$12,000$13,000$14,000(1 .61%)2(1 .61%)(1 .61%

4、)3$169,989.3$2,051,812.695$2,235,801.995$1,000$0In the real world, it is near to impossible to reinvest Cashflow 1 and 2 in a project with similar rate of return of 1207.61%.Therefore, the IRR gives an overestimate of the rate of the return of the investment.# IRR method assumes CFs are reinvested a

5、t IRRQ1+Q1+$12,000$13,000$14,000(1+15%)2(1+15%)(1+MIRR%)3$14,950$15,870$44,820$1,000$0#MIRR = 255.21% More conservative results.Q2# Inc.(VAI)：10,000shares * $100/share no debt Assets=Equity=$1,000,000# a promising project： incremental CFs（PV=$210,000） initial costs=$110,000# potential purchasers: fu

6、ll awareness of the info above willing to pay “fair value” Q2# Q2.1: NPV of the project ? To raise the required capital, how many shares & at what price should be issued? # Q2.2: effect on the value of the stock of the existing shareholders? Q2.1Q2.2# Analysis: potential purchasers full awareness of the info willing to pay “fair value” stock prices rise, the exsiting share holders capture the NPV. Q3# CFOs mission：pension planning for 100 workers, for 30 years 1st payment be made 1 yr from now # plan A：retire with $10,000/yr 8% annual return rate on deposit fund pension payou