公司理财及财务管理知识分析(双语)(ppt 45页)

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Net Present Value
The difference between the market value of a project and its cost.
Does the decision rule adjust for the time value of money?
Does the decision rule adjust for risk?
Does the decision rule provide information on whether we are creating value for the firm?
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NPV – Decision Rule
If the NPV is positive, accept the project
A positive NPV means that the project is expected to add value to the firm and will therefore increase the wealth of the owners.
NPV, 75%
IRR, 76%
Payback, 57%
Book rate of return, 20%
Profitability Index, 12%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
SOURCE: Graham and Harvey, “The Theory and Practice of Finance: Evidence from the Field,” Journal of Financial Economics 61 (2001), pp. 187-243.
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Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved
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CFO Decision Tools
Survey Data on CFO Use of Investment Evaluation Techniques
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Payback
The payback period of a project is the number of years it takes before the cumulative forecasted cash flow equals the initial outlay.
The payback rule says only accept projects that “payback” in the desired time frame.
Since our goal is to increase owner wealth, NPV is a direct measure of how well this project will meet our goal.
McGraw Hill/Irwin
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McGraw Hill/Irwin
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved
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Good Decision Criteria
We need to ask ourselves the following questions when evaluating capital budgeting decision rules:
Corporate Finance
Chapter 9
Why Net Present Valuwenku.baidu.com Leads to Better Investment
Decisions than Other Criteria
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Topics Covered
NPV and its Competitors The Payback Period The Average Accounting Return Internal Rate of Return Capital Rationing
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NPV – Decision Rule
Minimum Acceptance Criteria: Accept if NPV >0
Ranking Criteria: Choose the highest NPV
Example9.1 see page263
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NPV – Decision Rule
Estimating NPV:
1. Estimate future cash flows: how much? and when?
2. Estimate discount rate 3. Estimate initial costs
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Net Present Value (NPV) = ﹣Initial Investment + Total PV of future CF’s
McGraw Hill/Irwin
9-5 Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved