成本预算英文版课件

成本预算英文版课件成本预算英文版课件CapitalBudgetingChapter11

CapitalBudgetingChapter11Long-Term(Capital)AssetsCapitalassetsareequipmentorfacilitiesthatprovideservicestotheorganizationformorethanonefiscalperiod.Capitalassetscreatethesecapacity-relatedcosts3Long-Term(Capital)AssetsCapiNeedtoControlCapitalAssetsOrganizationshavedevelopedspecifictoolstocontroltheacquisitionanduseoflong-termassetsbecause:Organizationsareusuallycommittedtolong-term

assetsforanextendedtime,creatingthepotentialforExcesscapacitythatcreatesexcesscostsScarcecapacitythatcreateslostopportunitiesTheamountofmoneycommittedtotheacquisitionofcapitalassetsisusuallyquitelargeThelong-termnatureofcapitalassetscreatestechnologicalriskReduceanorganization’sflexibility4NeedtoControlCapitalAssetsMeaningofCapitalBudgetingCapitalbudgetingcanbedefinedastheprocessofanalyzing,evaluating,anddecidingwhetherresourcesshouldbeallocatedtoaprojectornot.

Capitalbudgetinghasthreephases:Identifyingpotentialinvestments,Choosingwhichinvestmentstomake,andFollow-upmonitoringoftheinvestments.5MeaningofCapitalBudgetingCa66TypesofCapitalBudgetingDecisionsShouldweaddanewproducttoourexistingproductline?Shouldweexpandintoanewmarket?Shouldwereplaceourexistingmachinery?ShouldwebuyfullyautomaticorsemiautomaticmachineryWheretolocatemanufacturingfacility?7TypesofCapitalBudgetingDecInvestmentandReturnInvestmentandreturnformthefoundationofcapitalbudgetinganalysis,whichfocusesonwhethertheexpectedincreasedcashflows(return)willjustifytheinvestmentinthelong-termassetInvestmentisthemonetaryvalueoftheassetstheorganizationgivesuptoacquirealong-termassetwhichareoftencalledcapitaloutlays.Returnistheincreasedfuturecashinflowsattributabletothelong-termasset8InvestmentandReturnInvestmenObviously,$1,000today.Moneyreceivedsoonerratherthanlaterallowsonetousethefundsforinvestmentorconsumptionpurposes.ThisconceptisreferredtoastheTIMEVALUEOFMONEY!!TheTimeValueofMoneyWhichwouldyouratherhave--$1,000todayor$1,000in5years?

9Obviously,$1,000today.TheTiTimeValueofMoney

Adollartodayisworthmorethanadollarayearfromnowsinceadollarreceivedtodaycanbeinvested,yieldingmorethanadollarayearfromnow.10TimeValueofMoney AdollartTimeValueofMoney(1of2)Timevalueofmoney(TVM)isacentralconceptincapitalbudgetingInmakinginvestmentdecisions,theproblemisthatinvestmentcashispaidoutnow,butthecashreturnisreceivedinthefutureWeneedanequivalentbasistocomparethecashflowsthatoccuratdifferentpointsintime11TimeValueofMoney(1of2)TiTimeValueofMoney(2of2)Thecriticalideaunderlyingcapitalbudgetingis:Amountsofmoneyspentorreceivedatdifferentperiodsoftimemustbeconvertedintotheirvalueonacommondateinordertobecompared12TimeValueofMoney(2of2)ThSomeStandardNotationForsimplicity,thefollowingnotationisused:Abbr.MeaningnFVPVarNumberofperiodsconsideredintheinvestmentanalysis;commonperiodlengthsareamonth,aquarter,orayearFuturevalue,orendingvalue,oftheinvestmentnperiodsfromnowPresentvalue,orthevalueatthecurrentmomentintime,ofanamounttobereceivednperiodsfromnowAnnuity,orequalamount,receivedorpaidattheendofeachperiodfornperiodsRateofreturnrequired,orexpected,fromaninvestmentopportunity;therateofinterestearnedonaninvestment13SomeStandardNotationForsimpTypesofInterestCompoundInterestInterestpaid(earned)onanypreviousinterestearned,aswellasontheprincipalborrowed(lent).SimpleInterestInterestpaid(earned)ononlytheoriginalamount,orprincipalborrowed(lent).SIn

=P0(1+i×n)CIn =P0(1+i)n14TypesofInterestCompoundIntePresentValueAnalystscallafuturecashflow’svalueattimezeroitspresentvalueTheprocessofcomputingpresentvalueiscalleddiscountingWecanrearrangetheFVformulatocomputethepresentvalue:FV=PVx(1+r)nPV=FV/(1+r)nor

PV=FVx(1+r)-nMethodssimilartothosedescribedearliermaybeusedtocomputethisvalueCalculator,tables,orspreadsheetsoftware15PresentValueAnalystscallafAssumethatyouneedtohaveexactly$4,000

saved10yearsfromnow.Howmuchmustyoudeposittodayinanaccountthatpays6%interest,compoundedannually,sothatyoureachyourgoalof$4,000?

0510$4,0006%PV0PresentValue (Graphic)16Assumethatyouneedtohavee

PV0=FV/(1+i)10 =$4,000

/(1.06)10 =$2,233.58PresentValue (Formula)

0510$4,0006%PV017PV0=FV/(1+i)10 =$4,000QuickCheck

Howmuchwouldyouhavetoputinthebanktodaytohave$100attheendoffiveyearsiftheinterestrateis10%?PVorFV?Table:____a.$62.10b.$56.70c.$90.90d.$51.9018QuickCheck Howmuchwould

Howmuchwouldyouhavetoputinthebanktodaytohave$100attheendoffiveyearsiftheinterestrateis10%?a.$62.10b.$56.70c.$90.90d.$51.90QuickCheck$1000.621=$62.1019 Howmuchwouldyouhavetop

PRESENTVALUEYear 5% 10% 15%1 .952 .909 .8702 .907 .826 .7565 .784 .621 .49710 .614 .386 .24720 .377 .149 .061PRESENTVALUEOF$120PRESENTVALUEPRESENT

PRESENTVALUEYear 5% 10% 15%1 .952 .909 .8702 .907 .826 .7565 .784 .621 .49710 .614 .386 .24720 .377 .149 .061PRESENTVALUEOF$1Afixedamountofcashtobereceivedatsomefuturetimebecomelessvaluableasinterestrateincreaseandthetimeperiodincreased21PRESENTVALUEPRESENTAnnuitiesAnAnnuityrepresentsaseriesofequalpayments(orreceipts)occurringoveraspecifiednumberofequidistantperiods.OrdinaryAnnuity:Paymentsorreceiptsoccurattheendofeachperiod.AnnuityDue:Paymentsorreceiptsoccuratthe beginningofeachperiod.22AnnuitiesOrdinaryAnnuity:PaExamplesofAnnuities

StudentLoanPaymentsCarLoanPaymentsMortgagePaymentsRetirementSavings23ExamplesofAnnuitiesStudentPartsofanAnnuity0123

$100$100$100(OrdinaryAnnuity)EndofPeriod1EndofPeriod2TodayEqualCashFlowsEach1PeriodApartEndofPeriod324PartsofanAnnuity0

PVAn =R(PVIFAi%,n) PVA3 =$1,000(PVIFA7%,3) =$1,000(2.624)=$2,624ValuationUsingTableIV25 PVAn =R(PVIFAi%,n) PVA3ApproachestoCapitalBudgetingOrganizationshavedevelopedmanyapproachestocapitalbudgetingfiveapproachesarediscussedhere:PaybackAccountingrateofreturnNetpresentvalueInternalrateofreturnProfitabilityindexDCFfocusonexpectedcashflowsandTVM26ApproachestoCapitalBudgetinNPV: SumofthePVsofinflowsandoutflows.CostoftenisCF0andisnegative.NetPresentValue27NPV: SumofthePVsofinflows2828NetPresentValue(1of4)Thestepsusedtocomputeaninvestment’snetpresentvalueareasfollows:Step1: ChoosetheappropriateperiodlengthtoevaluatetheinvestmentproposalTheperiodlengthdependsontheperiodicityoftheinvestment’scashflowsThemostcommonperiodusedinpracticeisoneyearStep2:Identifytheorganization’scostofcapital,andconvertittoanappropriaterateofreturnfortheperiodlengthchoseninstep129NetPresentValue(1of4)TheCostofCapitalThecostofcapitalistheinterestrateusedfordiscountingfuturecashflowsAlsoknownastherisk-adjusteddiscountrateThecostofcapitalisthereturntheorganizationmustearnonitsinvestmenttomeetitsinvestors’returnrequirementsTheorganization’scostofcapitalreflects:Theamountandcostofdebtandequityinitsfinancialstructure(WACC)Thefinancialmarket’sperceptionofthefinancialriskoftheorganization’sactivities30CostofCapitalThecostofcapNetPresentValue(2of4)Step3:Identifytheincrementalcashflow

ineachperiodoftheproject’slife.Step4:Computethepresentvalueofeachperiod’scashflowusingtheorganization’scostofcapitalforthediscountrateStep5:Sumthepresentvaluesofalltheperiodiccashinflowsandoutflowstodeterminetheinvestmentproject’snetpresentvalueStep6:Iftheproject’snetpresentvalueispositive,theprojectisacceptablefromaneconomicperspective31NetPresentValue(2of4)StepTypicalCashOutflowsRepairsandmaintenanceIncrementaloperatingcostsInitialinvestmentWorkingcapital32TypicalCashOutflowsRepairsaTypicalCashInflowsReductionofcostsSalvagevalueIncrementalrevenuesReleaseofworkingcapital33TypicalCashInflowsReductionSGeneraldecisionrule...TheNetPresentValueMethod34Generaldecisionrule...TheTheNetPresentValue(NPV)Criterion-ExampleAcompanycanpurchaseamachinefor$2200.Themachinehasaproductivelifeofthreeyears.Itwillgeneratenetcashflowsof$770inthefirstyear,$968inthesecond,and$1331inthethird.Ifthefirmdoesnotbuythismachine,itcaninvestitsmoneyelsewhereandearnareturnof10%.Shouldthemachinebebought?35TheNetPresentValue(NPV)CrTheNetPresentValue(NPV)Criterion-ExampleSo,wecalculatetheNPVusingthePVofestimatedcashflows.36TheNetPresentValue(NPV)CrTheNetPresentValue(NPV)Criterion-ExampleInthiscase,theNPVispositive.Thismeanstheinvestmentshouldbeundertaken.37TheNetPresentValue(NPV)CrQuickCheckDataDennyAssociateshasbeenofferedafour-yearcontracttosupplythecomputingrequirementsforalocalbank.Theworkingcapitalwouldbereleasedattheendofthecontract.DennyAssociatesrequiresa14%return.38QuickCheckDataDennyAssociatQuickCheck

Whatisthenetpresentvalueofthecontractwiththelocalbank?a.$150,000b.$28,230c.$92,340d.$132,91639QuickCheck Whatisthenet

Whatisthenetpresentvalueofthecontractwiththelocalbank?a.$150,000b.$28,230c.$92,340d.$132,916QuickCheck40 WhatisthenetpresentvaluComparisonofTwoProjectsTwocommonmethodsforcomparingalternativesare:TotalprojectapproachDifferentialapproach41ComparisonofTwoProjectsTwoTotalProjectApproachThetotalprojectapproachcomputesthetotalimpactoncashflowsforeachalternativeandthenconvertsthesetotalcashflowstotheirpresentvalues.ThealternativewiththelargestNPVoftotalcashflowsisbest.42TotalProjectApproachThetotaDifferentialApproachThedifferentialapproachcomputesthedifferencesincashflowsbetweenalternativesandthenconvertsthesedifferencestotheirpresentvalues.Thismethodcannotbeusedtocomparemorethantwoalternatives.43DifferentialApproachThediffe4444GoodAttributesoftheNPVRule1.Usescashflows2.UsesALLcashflowsoftheproject3.DiscountsALLcashflowsproperlyReinvestmentassumption:theNPVruleassumesthatallcashflowscanbereinvestedatthediscountrate.45GoodAttributesoftheNPVRul

“Salesisvanity,profitis

necessary,butcashisking”46

“Salesisvanity,profitisSoundsgoodMysaleshavegrownby5%overthelastfewyearsMybusinessmakesaprofitof£xmperyear–thebanksandinvestorsneedthisBut….47SoundsgoodMysaleshavegrownCashControlCashisthelifebloodofanybusiness.ItisessentialtoenablethebusinesstocarryoutdaytodaytransactionsAnorganisationcanmakeaprofitbutwithoutasustainableflowcanbeindangerofgoingintoliquidationAbusinessshouldcontinuetodrivecashgenerationinordertosustainbusinessoperationsandtofundfuturegrowthPoorcashflowlimitsopportunitiesand/oroptions,canleavelittleroomtorespondtothreatsCashisoftenthefirstsignofdeteriorationandsendsignalstostakeholders48CashControlCashisthelifeblEffectofTaxesTheeffectoftaxesoncapitalbudgetingistwo-fold:Organizationsmustpaytaxesonanynetbenefitsprovidedbytheinvestments.Organizationscanusethedepreciationassociatedwithacapitalinvestmenttoreduceincomeandoffsetsomeoftheirtaxes.So,analysisofcapitalbudgetingrequiresconvertingallpretaxcashflowstoafter-taxcashflows.49EffectofTaxesTheeffectoftEffectsofDepreciationDeductionsDepreciationexpenseisanoncashexpenseandsoisignoredforcapitalbudgeting,exceptthatitisanexpensefortaxpurposesandsowillprovideacashinflowfromincometaxsavings(depreciationtaxshields)TAX50EffectsofDepreciationDeductweshowhowcashflowsarerelatedtoaccountingnumbersandtaxes.Definethenetcashflowgeneratedbycertainassetsas:NetCashFlow=CashInflow-CashOutflow=Revenue-Expenses-CapitalExpenditure-TaxesTheincometaxpaidisdeterminedby:Taxes=t*(Revenue-Expenses-Depreciation)NetCashflow=(1-t)*(Revenue–Expenses)+t*Depreciation51weshowhowcashflowsarerel52525353JoshuaManufacturingCompany(JMC)isconsideringbuyingsomenewequipmentthatwouldallowforincreasedsalesofitsproduct.Theincrementalimpactoftheproposed$280,000investmentisshownbelowusingstraight-linedepreciationandanexpectedusefullifeoffouryearsfortheequipment.Thecompanyhasaminimumdesiredrateofreturnof14%. Revenues $420,000 Nondepreciationexpenses $240,000 Depreciation 70,000 Totalexpenses $310,000 Taxableincome $110,000 Incometax(40%) 44,000 NetIncome $66,00054JoshuaManufacturingCompany(1. Theannualcashinflowsexpectedfromtheprojectare:a.$80,000 b.$68,000 c.$136,000 d.$108,0002. Thepresentvalueofthetaxsavingsfromstraight-linedepreciationis:a.$100,000b.$81,584 c.$28,274 d.$03. TheNPVoftheinvestmentusingstraight-linedepreciationis:a.($280,000)b.($1,868.40) c.$396,264 d.$116,264.551. Theannualcashinflowsex

1.[c]

Theeasiestwaytocomputethecashflowsgeneratedbytheinvestmentistoaddthedepreciationbacktothenetincome.Inthiscase,$70,000+$68,000=$136,000.Alternatively,onecouldaddtheafter-taxcashflowsfromoperationstothetaxsavingsresultingfromthedepreciationexpense.Here,$108,000[($420,000-$240,000)x(1-.40)]+$28,000[$70,000x.40]alsogives$136,000intotalafter-taxcashflows.561.[c] Theeasiestwaytoco2.[b]

Theannualtaxsavingsfromdepreciationare$28,000[$70,000x.40].Thepresentvalueofthesavingsiscomputedbymultiplyingthe$28,000bythepresentvaluefactorforanannuityforfouryearsat14%of2.9137.Theresultis$81,584.572.[b] TheannualtaxsavingsInflationeffectsInflationThedeclineinthegeneralpurchasingpowerofthepowerofthemonetaryunit.ConsistencyConsistenttreatmentoftheminimumdesiredrateofreturnandthepredictedcashflows.58InflationeffectsInflation58Othermethodsofanalysis

59Othermethodsofanalysis

59InternalRateofReturnTheinternalrateofreturn(IRR)istheactualrateofreturnexpectedfromaninvestmentTheIRRisthediscountratethatmakestheinvestment’snetpresentvalueequaltozeroIfaninvestment’sNPVispositive,thenitsIRRexceedsitscostofcapitalIfaninvestment’sNPVisnegative,thenit’sIRRislessthanitscostofcapital60InternalRateofReturnTheintCalculatingtheIRRLetaproject’scashflowbeC1,C2,C3,…,CN.LettheinitialcostoftheprojectbeC0.Then,theIRRisrinthefollowingequation:61CalculatingtheIRRLetaprojeCalculatingtheIRRTwocasesLevelcashinflows(thesameamounteachyear)uneveninflows62CalculatingtheIRRTwocases62InternalRateofReturnMethodDeckerCompanycanpurchaseanewmachineatacostof$104,320thatwillsave$20,000peryearincashoperatingcosts.Themachinehasa10-yearlife.63InternalRateofReturnMethodInternalRateofReturnMethodFuturecashflowsarethesameeveryyearinthisexample,sowecancalculatetheinternalrateofreturnasfollows:

InvestmentrequiredNetannualcashflowsPVfactorforthe

internalrateofreturn=$104,320

$20,000=5.216Investment/inflowratio64InternalRateofReturnMethodInternalRateofReturnMethodFindthe10-periodrow,moveacrossuntilyoufindthefactor5.216.Lookatthetopofthecolumnandyoufindarateof14%.Usingthepresentvalueofanannuityof$1table...65InternalRateofReturnMethodUnevencashinflowsConsiderthefollowingproject:0123$50$100$150-$20066UnevencashinflowsConsiderthCalculatingtheIRRTheequationcannotbesolvedforr.Wecanuseatrialanderrorapproach.Orwecoulduse“solver”or“goalseek”inExcel.67CalculatingtheIRRTheequatioTheNPVPayoffProfileforThisExampleIfwegraphNPVversusdiscountrate,wecanseetheIRRasthex-axisintercept.IRR=19.44%68TheNPVPayoffProfileforThiTheIRRDecisionRuleMinimumAcceptanceCriteriaforscreeningproblem:AcceptiftheIRRexceedstherequiredreturn.RankingCriteriaforpreferenceproblemsSelectalternativewiththehighestIRR69TheIRRDecisionRuleMinimumAThePaybackMethodThepaybackperiodisthelengthoftimethatittakesforaprojecttorecoveritsinitialcostoutofthecashreceiptsthatitgenerates.

PaybackPeriod=numberofyearstorecoverinitialcosts70ThePaybackMethodThepaybackWhenthenetannualcashinflowisthesameeachyear,thisformulacanbeusedtocomputethepaybackperiod:Whenthenetannualcashinflowisnotconstantfromyeartoyear,thepaybackperiodisdeterminedbyaddingupthecashinflowsexpectedinsuccessiveyearsuntilthetotalisequaltotheoriginaloutlay.ThePaybackMethodPaybackperiod=

Investmentrequired

Netannualcashinflow71WhenthenetannualcashinfloDecisioncriterionThepaybackmethodassumesthatriskistime-related:thelongertheperiod,thegreaterthechanceoffailure,so:Whenprojectsaremutuallyexclusive,accepttheprojectwithshortestpaybackperiod.Oraccepttheproposalwhichpaybackperiodislessthetargetperiod(whichisdeterminedbycompany’spolicy).72DecisioncriterionThepaybackThePaybackMethod

ManagementatTheDailyGrindwantstoinstallanespressobarinitsrestaurant.Theespressobar:Costs$140,000andhasa10-yearlife.Willgeneratenetannualcashinflowsof$35,000.Managementrequiresapaybackperiodof5yearsorlessonallinvestments.Whatisthepaybackperiodfortheespressobar?73ThePaybackMethodManagemenThePaybackMethodPaybackperiod=

InvestmentrequiredNetannualcashinflowPaybackperiod=$140,000$35,000Paybackperiod=4.0yearsAccordingtothecompany’scriterion,managementwouldinvestintheespressobarbecauseitspaybackperiodislessthan5years.74ThePaybackMethodPaybackperiQuickCheck

Considerthefollowingtwoinvestments:

ProjectX

ProjectY Initialinvestment $100,00 $100,000 Year1cashinflow $60,000 $60,000 Year2cashinflow $40,000 $35,000 Year3-10cashinflows $0 $25,000

Whichprojecthastheshortestpaybackperiod?a.ProjectXb.ProjectYc.Cannotbedetermined75QuickCheck Considerthefo

Considerthefollowingtwoinvestments:

ProjectX

ProjectY Initialinvestment $100,00 $100,000 Year1cashinflow $60,000 $60,000 Year2cashinflow $40,000 $35,000 Year3-10cashinflows $0 $25,000

Whichprojecthastheshortestpaybackperiod?a.ProjectXb.ProjectYc.CannotbedeterminedQuickCheckProjectXhasapaybackperiodof2years.ProjectYhasapaybackperiodofslightlymorethan2years.Whichprojectdoyouthinkisbetter?76 ConsiderthefollowingtwoiStrengthsofPayback:1. Providesanindicationofaproject’sriskandliquidity.2. Easytocalculateandunderstand.WeaknessesofPayback:1. IgnorestheTVM.2. IgnoresCFsoccurringafterthepaybackperiod.EvaluationofthePaybackMethod77StrengthsofPayback:1. Provid

EvaluationofthePaybackMethod

Itisthemethodmostwidelyusedinpracticeandparticularlyusefulapproachfor:RankingprojectswhereafirmfacesliquidityconstraintsandrequireafastrepaymentofinvestmentAsituationwhereriskyinvestmentsaremadeinuncertainmarketsthataresubjecttofastdesignandproductchanges.preliminaryscreeningofmanyproposalsisnecessary;PaybackmethodshouldbeusedinconjunctionwiththeNPVmethod.78

EvaluationofthePaybackMeAccountingRateofReturnMethodDoesnotfocusoncashflows--ratheritfocusesonaccountingincome.Thefollowingformulaisusedtocalculatethesimplerateofreturn:accountingrateofreturn=

AverageincomeAverageinvestment79AccountingRateofReturnMethEvaluationofaccountingrateofreturnFocusonaccountingincomeandignoretheTVM.Itisaimprovementoverthepaybackmethodinthatitconsidersincomeinallperiods80EvaluationofaccountingrateDespitetheconceptualsuperiorityofmethodsthatinvolvediscounting,surveysshowthatthepaybackandaccountingreturnmethodsarewidelyused.Andthemostcompaniesusetwoormoremethodsintheirinvestmentproposalanalyses.Anthony,etal,accounting:textandcases,机械工业出版社，2007，P425

Why？81DespitetheconceptualsuperioPotentialconflict(P495)Somecorporatemanagerstendtobeconcernedabouttheshort-runimpactaproposedprojectwouldhaveoncorporateprofitabilityasreportedinthepublishedFSThemanagerofaprofitcentermayhavesimilarconcerns.Particularlylikelytohappenifthemanagerhasincentivecompensationtiedtotheprofitcentersshort-runprofitabilityManagersriskaversion(fearbeingpenalizediftheprojectdoesnotworkoutasanticipated).82Potentialconflict(P495)82Insum,factorsotherthanthetrueeconomicreturn(i.e.,IRR),ofaprojectgreatly–andunderstandably-influencewhetheraprojectisapprovedandeverwhethertheprojectisformallyproposedtotopmanagement.83Insum,factorsotherthanthe8484ReconciliationofconflictTouseDCFforbothcapital-budgetingdecisionsandperformanceevaluation.Toconductafollow-upevaluationofcapital-budgetingdecision.postauditing85ReconciliationofconflictTouPost-ImplementationAuditsRevisitingthedecisiontopurchasealong-livedassetiscalledapost-implementationauditofthecapitalbudgetingdecisionandprovidesmanyvaluableinsightsfordecisionmakersWhenestimatesareusedtosupportproposals,recognizingthebehavioralimplicationsthatliebehindthemisimportantForexample,aproductionsupervisorwhoisanxioustohavethelatestproductionequipmentmaybeoptimistictothepointofbeingrecklessinforecastingthebenefitsofacquiringtheequipment86Post-ImplementationAuditsReviPost-ImplementationAuditsBycomparingestimateswithresults,theorganizationsplannerscanidentifywheretheirestimatesarewrongandtrytoavoidmakingsimilarmistakesinthefutureByassessingtheskillofplanners,organizationscanidentifyandrewardthosewhoaregoodatmakingcapitalbudgetingdecisionsByauditingtheresultsofacquiringlong-termassets,companiescreateanenvironmentinwhichplannersarelesstemptedtoinflateestimatesofthecashbenefitsassociatedwiththeirprojectsinordertogetthemapproved87Post-ImplementationAuditsByc成本预算英文版课件成本预算英文版课件CapitalBudgetingChapter11

CapitalBudgetingChapter11Long-Term(Capital)AssetsCapitalassetsareequipmentorfacilitiesthatprovideservicestotheorganizationformorethanonefiscalperiod.Capitalassetscreatethesecapacity-relatedcosts90Long-Term(Capital)AssetsCapiNeedtoControlCapitalAssetsOrganizationshavedevelopedspecifictoolstocontroltheacquisitionanduseoflong-termassetsbecause:Organizationsareusuallycommittedtolong-term

assetsforanextendedtime,creatingthepotentialforExcesscapacitythatcreatesexcesscostsScarcecapacitythatcreateslostopportunitiesTheamountofmoneycommittedtotheacquisitionofcapitalassetsisusuallyquitelargeThelong-termnatureofcapitalassetscreatestechnologicalriskReduceanorganization’sflexibility91NeedtoControlCapitalAssetsMeaningofCapitalBudgetingCapitalbudgetingcanbedefinedastheprocessofanalyzing,evaluating,anddecidingwhetherresourcesshouldbeallocatedtoaprojectornot.

Capitalbudgetinghasthreephases:Identifyingpotentialinvestments,Choosingwhichinvestmentstomake,andFollow-upmonitoringoftheinvestments.92MeaningofCapitalBudgetingCa936TypesofCapitalBudgetingDecisionsShouldweaddanewproducttoourexistingproductline?Shouldweexpandintoanewmarket?Shouldwereplaceourexistingmachinery?ShouldwebuyfullyautomaticorsemiautomaticmachineryWheretolocatemanufacturingfacility?94TypesofCapitalBudgetingDecInvestmentandReturnInvestmentandreturnformthefoundationofcapitalbudgetinganalysis,whichfocusesonwhethertheexpectedincreasedcashflows(return)willjustifytheinvestmentinthelong-termassetInvestmentisthemonetaryvalueoftheassetstheorganizationgivesuptoacquirealong-termassetwhichareoftencalledcapitaloutlays.Returnistheincreasedfuturecashinflowsattributabletothelong-termasset95InvestmentandReturnInvestmenObviously,$1,000today.Moneyreceivedsoonerratherthanlaterallowsonetousethefundsforinvestmentorconsumptionpurposes.ThisconceptisreferredtoastheTIMEVALUEOFMONEY!!TheTimeValueofMoneyWhichwouldyouratherhave--$1,000todayor$1,000in5years?

96Obviously,$1,000today.TheTiTimeValueofMoney

Adollartodayisworthmorethanadollarayearfromnowsinceadollarreceivedtodaycanbeinvested,yieldingmorethanadollarayearfromnow.97TimeValueofMoney AdollartTimeValueofMoney(1of2)Timevalueofmoney(TVM)isacentralconcept