Ross7eCh07Net_Present_Value_and_Capital_Budgeting(公司理财_罗斯_第七版)(47页PPT).pptx

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1、McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.CHAPTER7Net Present Valueand Capital Budgeting1McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.ChapterOutline7.1IncrementalCashFlows7.2TheBaldwinCompany:AnExamp

2、le7.3TheBoeing777:AReal-WorldExample7.4InflationandCapitalBudgeting7.5InvestmentsofUnequalLives:TheEquivalentAnnualCostMethod7.6SummaryandConclusions2McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.7.1IncrementalCashFlowsCashflowsmatternotaccountingearni

3、ngs.Sunkcostsdontmatter.Incrementalcashflowsmatter.Opportunitycostsmatter.Sideeffectslikesynergyanderosionmatter.Taxesmatter:wewantincrementalafter-taxcashflows.Inflationmatters.3McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.CashFlowsNotAccountingEarni

4、ngsConsiderdepreciationexpense.Youneverwriteacheckmadeoutto“depreciation”.Muchoftheworkinevaluatingaprojectliesintakingaccountingnumbersandgeneratingcashflows.4McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.IncrementalCashFlowsSunkcostsOpportunitycostsd

5、omatter.JustbecauseaprojecthasapositiveNPVthatdoesnotmeanthatitshouldalsohaveautomaticacceptance.SpecificallyifanotherprojectwithahigherNPVwouldhavetobepassedupweshouldnotproceed.5McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.IncrementalCashFlowsSideef

6、fectsmatter.Erosion(Ifournewproductcausesexistingcustomerstodemandlessofcurrentproducts,weneedtorecognizethat.)Synergy6McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.EstimatingCashFlowsCashFlowsfromOperationsRecallthat:OperatingCashFlow=EBITTaxes+Deprec

7、iationNetCapitalSpendingDontforgetsalvagevalue(aftertax,ofcourse).7McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.InterestExpenseLaterchapterswilldealwiththeimpactthattheamountofdebtthatafirmhasinitscapitalstructurehasonfirmvalue.Fornow,itsenoughtoassum

8、ethatthefirmslevelofdebt(henceinterestexpense)isindependentoftheprojectathand.8McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.7.2TheBaldwinCompany:AnExampleCostsoftestmarketing(alreadyspent):$250,000.Currentmarketvalueofproposedfactorysite(whichweown):$

9、150,000.Costofbowlingballmachine:$100,000(depreciatedaccordingtoACRS5-yearlife).Increaseinnetworkingcapital:$10,000.Production(inunits)byyearduring5-yearlifeofthemachine:5,000,8,000,12,000,10,000,6,000.Priceduringfirstyearis$20;priceincreases2%peryearthereafter.Productioncostsduringfirstyearare$10pe

10、runitandincrease10%peryearthereafter.Annualinflationrate:5%WorkingCapital:initially$10,000changeswithsales.9McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.TheWorksheetforCashFlowsoftheBaldwinCompanyYear 0Year 1Year 2Year 3Year 4 Year 5 Investments:(1)Bo

11、wlingballmachine100.0021.76*(2)Accumulated20.0052.0071.2082.7294.24depreciation(3)Adjustedbasisof80.0048.0028.8017.285.76machineafterdepreciation(endofyear)(4)Opportunitycost150.00150.00(warehouse)(5)Networkingcapital10.0010.0016.3224.9721.220(endofyear)(6)Changeinnet10.006.328.653.7521.22workingcap

12、ital(7)Totalcashflowof260.006.328.653.75192.98investment(1)+(4)+(6)*Weassumethattheendingmarketvalueofthecapitalinvestmentatyear5is$30,000.Capitalgainisthedifferencebetweenendingmarketvalueandadjustedbasisofthemachine.Theadjustedbasisistheoriginalpurchasepriceofthemachinelessdepreciation.Thecapitalg

13、ainis$24,240(=$30,000$5,760).WewillassumetheincrementalcorporatetaxforBaldwinonthisprojectis34percent.Capitalgainsarenowtaxedattheordinaryincomerate,sothecapitalgainstaxdueis$8,2400.34($30,000$5,760).Theafter-taxsalvagevalueis$30,0000.34($30,000$5,760)=21,760.($thousands)(Allcashflowsoccurattheendof

14、theyear.)10McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.TheWorksheetforCashFlowsoftheBaldwinCompany($thousands)(Allcashflowsoccurattheendoftheyear.)Year 0Year 1Year 2Year 3Year 4 Year 5 Investments:(1)Bowlingballmachine100.0021.76*(2)Accumulated20.005

15、2.0071.2082.7294.24depreciation(3)Adjustedbasisof80.0048.0028.8017.285.76machineafterdepreciation(endofyear)(4)Opportunitycost150.00150.00(warehouse)(5)Networkingcapital10.0010.0016.3224.9721.220(endofyear)(6)Changeinnet10.006.328.653.7521.22workingcapital(7)Totalcashflowof260.006.328.653.75192.98in

16、vestment(1)+(4)+(6)150Attheendoftheproject,thewarehouseisunencumbered,sowecansellitifwewantto.11McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.TheWorksheetforCashFlowsoftheBaldwinCompany(continued)Year 0Year 1Year 2Year 3Year 4 Year 5Income:(8)SalesReve

17、nues100.00163.00249.72212.20129.90($thousands)(Allcashflowsoccurattheendoftheyear.)Recallthatproduction(inunits)byyearduring5-yearlifeofthemachineisgivenby:(5,000,8,000,12,000,10,000,6,000).Priceduringfirstyearis$20andincreases2%peryearthereafter.Salesrevenueinyear3=12,000$20(1.02)2=12,000$20.81=$24

18、9,720.12McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.TheWorksheetforCashFlowsoftheBaldwinCompany(continued)Year 0Year 1Year 2Year 3Year 4 Year 5Income:(8)SalesRevenues100.00163.00249.72212.20129.90(9)Operatingcosts50.0088.00145.20133.1087.84($thousand

19、s)(Allcashflowsoccurattheendoftheyear.)Again,production(inunits)byyearduring5-yearlifeofthemachineisgivenby:(5,000,8,000,12,000,10,000,6,000).Productioncostsduringfirstyear(perunit)are$10and(increase10%peryearthereafter).Productioncostsinyear2=8,000$10(1.10)1=$88,00013McGraw-Hill/IrwinCorporate Fina

20、nce,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.TheWorksheetforCashFlowsoftheBaldwinCompany(continued)Year 0Year 1Year 2Year 3Year 4 Year 5Income:(8)SalesRevenues100.00163.00249.72212.20129.90(9)Operatingcosts50.0088.00145.20133.1087.84(10)Depreciation20.0032.0019.2011.5211.52($thousa

21、nds)(Allcashflowsoccurattheendoftheyear.)DepreciationiscalculatedusingtheAcceleratedCostRecoverySystem(shownatright)Ourcostbasisis$100,000Depreciationchargeinyear4=$100,000(.1152)=$11,520.YearACRS%120.00%232.00%319.20%411.52%511.52%65.76%Total 100.00%14McGraw-Hill/IrwinCorporate Finance,7/e 2005 The

22、 McGraw-Hill Companies,Inc.All Rights Reserved.TheWorksheetforCashFlowsoftheBaldwinCompany(continued)Year 0Year 1Year 2Year 3Year 4 Year 5Income:(8)SalesRevenues 100.00163.00249.72212.20129.90(9)Operatingcosts 50.0088.00145.20133.1087.84(10)Depreciation20.0032.0019.2011.5211.52(11)Incomebeforetaxes3

23、0.0043.2085.3267.5830.54(8)(9)-(10)(12)Taxat34percent10.2014.6929.0122.9810.38(13)NetIncome19.8028.5156.3144.6020.16($thousands)(Allcashflowsoccurattheendoftheyear.)15McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.IncrementalAfterTaxCashFlowsoftheBaldwi

24、nCompanyYear 0Year 1Year 2Year 3Year 4Year 5(1)SalesRevenues$100.00$163.00$249.72$212.20$129.90(2)Operatingcosts-50.00-88.00-145.20133.10-87.84(3)Taxes-10.20-14.69-29.01-22.98-10.38(4)OCF(1)(2)(3)39.8060.5175.5156.1231.68(5)TotalCFofInvestment260.6.328.653.75192.98(6)IATCF(4)+(5)260.39.8054.1966.865

25、9.87224.6605.588,51$)10.1(66.224$)10.1(87.59$)10.1(86.66$)10.1(19.54$)10.1(80.39$260$5432=+-=NPVNPV16McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.NPVBaldwinCompany139.8051,588.05260CF1F1CF0INPV10154.19CF2F2166.86CF3F3159.87CF4F41224.66CF5F517McGraw-Hi

26、ll/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.7.3InflationandCapitalBudgetingInflationisanimportantfactofeconomiclifeandmustbeconsideredincapitalbudgeting.Considertherelationshipbetweeninterestratesandinflation,oftenreferredtoastheFisherrelationship:(1+NominalR

27、ate)=(1+RealRate)(1+InflationRate)Forlowratesofinflation,thisisoftenapproximatedasRealRateNominalRateInflationRateWhilethenominalrateintheU.S.hasfluctuatedwithinflation,mostofthetimetherealratehasexhibitedfarlessvariancethanthenominalrate.Whenaccountingforinflationincapitalbudgeting,onemustcomparere

28、alcashflowsdiscountedatrealratesornominalcashflowsdiscountedatnominalrates.18McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.ExampleofCapitalBudgetingunderInflationSonyInternationalhasaninvestmentopportunitytoproduceanewstereocolorTV.Therequiredinvestmen

29、tonJanuary1ofthisyearis$32million.Thefirmwilldepreciatetheinvestmenttozerousingthestraight-linemethod.Thefirmisinthe34%taxbracket.ThepriceoftheproductonJanuary1willbe$400perunit.Thepricewillstayconstantinrealterms.Laborcostswillbe$15perhouronJanuary1.Thewillincreaseat2%peryearinrealterms.Energycosts

30、willbe$5perTV;theywillincrease3%peryearinrealterms.Theinflationrateis5%Revenuesarereceivedandcostsarepaidatyear-end.19McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.ExampleofCapitalBudgetingunderInflationTherisklessnominaldiscountrateis4%.Therealdiscoun

31、trateforcostsandrevenuesis8%.CalculatetheNPV.Year1Year2Year3Year4PhysicalProduction(units)100,000200,000200,000150,000LaborInput(hours)2,000,0002,000,0002,000,0002,000,000Energyinput,physicalunits200,000200,000200,000200,00020McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.

32、All Rights Reserved.CF0ExampleofCapitalBudgetingunderInflationThedepreciationtaxshieldisarisk-freenominalcashflow,andisthereforediscountedatthenominalrisklessrate.Costofinvestmenttoday=$32,000,000Projectlife=4yearsAnnualdepreciationexpense:Depreciationtaxshield=$8,000,000.34=$2,720,00042,720,0000CF1

33、F19,873,315INPV4$8,000,000=$32,000,0004years21McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.Year1After-taxRealRiskyCashFlowsRiskyRealCashFlowsPrice:$400perunitwithzerorealpriceincreaseLabor:$15perhourwith2%realwageincreaseEnergy:$5perunitwith3%realener

34、gycostincreaseYear1After-taxRealRiskyCashFlows:After-taxrevenues=$400100,000(1.34)=$26,400,000After-taxlaborcosts=$152,000,0001.02(1.34)=$20,196,000After-taxenergycosts=$52,00,0001.03(1.34)=$679,800After-taxnetoperatingCF=$26,400,000$20,196,000$679,800=$5,524,20022McGraw-Hill/IrwinCorporate Finance,

35、7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.Year2After-taxRealRiskyCashFlowsRiskyRealCashFlowsPrice:$400perunitwithzerorealpriceincreaseLabor:$15perhourwith2%realwageincreaseEnergy:$5perunitwith3%realenergycostincreaseYear1After-taxRealRiskyCashFlows:After-taxrevenues=$400100,000(1.34

36、)=$26,400,000After-taxlaborcosts=$152,000,000(1.02)2(1.34)=$20,599,920After-taxenergycosts=$52,00,000(1.03)2(1.34)=$700,194After-taxnetoperatingCF=$26,400,000$20,599,920$700,194=$31,499,88623McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.Year3After-taxR

37、ealRiskyCashFlowsRiskyRealCashFlowsPrice:$400perunitwithzerorealpriceincreaseLabor:$15perhourwith2%realwageincreaseEnergy:$5perunitwith3%realenergycostincreaseYear1After-taxRealRiskyCashFlows:After-taxrevenues=$400100,000(1.34)=$26,400,000After-taxlaborcosts=$152,000,000(1.02)3(1.34)=$21,011.92After

38、-taxenergycosts=$52,00,000(1.03)3(1.34)=$721,199.82After-taxnetoperatingCF=$26,400,000$21,011.92$721,199.82=$31,066,88224McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.Year4After-taxRealRiskyCashFlowsRiskyRealCashFlowsPrice:$400perunitwithzerorealpricei

39、ncreaseLabor:$15perhourwith2%realwageincreaseEnergy:$5perunitwith3%realenergycostincreaseYear1After-taxRealRiskyCashFlows:After-taxrevenues=$400100,000(1.34)=$26,400,000After-taxlaborcosts=$152,000,000(1.02)4(1.34)=$21,432.16After-taxenergycosts=$52,00,000(1.03)4(1.34)=$742,835.82After-taxnetoperati

40、ngCF=$26,400,000$21,432.16$742,835.82=$17,425,00725McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.ExampleofCapitalBudgetingunderInflation$5,524,200$31,499,886$31,066,882$17,425,007-$32,000,0000 1 2 3415,524,00032mCF1F1CF0131,499,886CF2F2131,066,882CF3F3

41、117,425,007CF4F469,590,868INPV826McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.ExampleofCapitalBudgetingunderInflationTheprojectNPVcannowbecomputedasthesumofthePVofthecost,thePVoftheriskycashflowsdiscountedattheriskyrateandthePVoftherisk-freecashflowsd

42、iscountedattherisk-freediscountrate.NPV=$32,000,000+$69,590,868+$9,873,315=$47,464,18327McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.7.3TheBoeing777:AReal-WorldExampleInlate1990,theBoeingCompanyannounceditsintentiontobuildtheBoeing777,acommercialairpl

43、anethatcouldcarryupto390passengersandfly7,600miles.Analystsexpectedtheup-frontinvestmentandR&Dcostswouldbeasmuchas$8billion.Deliveryoftheplaneswasexpectedtobeginin1995andcontinueforatleast35years.28McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.Table7.5

44、IncrementalCashFlows:Boeing777YearUnitsSalesRevenueOperatingCostsDep.TaxesD DNWCCapitalSpendingInvest-mentNetCashFlow1991$865.00$40.00$(307.70)$400.00$400.00$(957.30)19921,340.0096.00(488.24)600.00600.00(1,451.76)19931,240.00116.40(461.18)300.00300.00(1,078.82)1994840.00124.76(328.02)200.00200.00(71

45、1.98)199514$1,847.551,976.69112.28(82.08)181.06181.061.85182.91(229.97)199614519,418.9617,865.45101.06493.831,722.001,722.0019.421,741.42681.74199714019,244.2316,550.0490.95885.10(17.12)19.422.301,806.79NetCashFlowcanbedeterminedinthreesteps:Taxes($19,244.23$16,550.04$90.95)0.34=$885.10Investment$17

46、.12+$19.42=$2.30NCF$19,244.23$16,550.04$885.10$2.30=$1,806.7929McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.1991$(957.30)2002$1,717.262013$2,213.181992$(1,451.76)2003$1,590.012014$2,104.731993$(1,078.82)2004$1,798.972015$2,285.771994$(711.98)2005$616.

47、792016$2,353.811995$(229.97)2006$1,484.732017$2,423.891996$681.742007$2,173.592018$2,496.051997$1,806.792008$1,641.972019$2,568.601998$1,914.062009$677.922020$2,641.011999$1,676.052010$1,886.962021$2,717.532000$1,640.252011$2,331.332022$2,798.772001$1,716.802012$2,576.472023$2,882.442024$2,964.45Yea

48、rYearYearNCFNCFNCF30McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.7.3TheBoeing777:AReal-WorldExamplePriorto1990,Boeinghadinvestedseveralhundredmilliondollarsinresearchanddevelopment.Sincethesecashoutflowswereincurredpriortothedecisiontobuildtheplane,th

49、eyaresunk costs.TherelevantcostsweretheatthetimethedecisionwasmadeweretheforecastedNetCashFlows31McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.NPVProtheBoeing777ProjectThisgraphshowsNPVasafunctionofthediscountrate.Boeingshouldacceptthisprojectatdiscoun

50、trateslessthan21percentandrejecttheprojectathigherdiscountrates.IRR=21.12%32McGraw-Hill/IrwinCorporate Finance,7/e 2005 The McGraw-Hill Companies,Inc.All Rights Reserved.Boeing777Asitturnedout,salesfailedtomeetexpectations.InfairnesstothefinancialanalystsatBoeing,thereisanimportantdistinctionbetween