会计学原理英文课件 (25)
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25 - 1
Capital Budgeting and Managerial Decisions
Chapter 25
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
25 - 2
Capital Budgeting
Capital budgeting:
Analyzing alternative long-term investments and deciding which assets to acquire or sell.
Calculate the payback period.
Payback Cost of Investment = period Annual Net Cash Flow
Payback = period $16,000 $4,100
= 3.9 years
25 - 5
P1
Computing Payback Period with Uneven Cash Flows
Determine the IRR for this project.
1.
Compute present value factor. $12,000 ÷ $5,000 per year = 2.40
2. Using present value of annuity table . . .
25 - 17
Use of Internal Rate of Return Compare the internal rate of return on a project to a predetermined hurdle rate (cost of capital). To be acceptable, a project’s rate of return cannot be less than the company’s cost of capital.
Project One Net Cash Inflows $ 2,000 2,000 2,000 2,000 2,000 Project Two Net Cash Inflows $ 1,000 1,000 1,000 1,000 1,000,000
Year 1 2 3 4 5
Would you invest in Project One over Project Two just because it has a shorter payback period?
In the previous example, we assumed that the increase in cash flows would be the same each year. Now, let’s look at an example where the cash flows vary each year.
25 - 15
P4
Internal Rate of Return (IRR)
The interest rate that makes . . .
Present Present value of value of = cash inflows cash outflows
The net present value equals zero.
Payback is about 4.2 years.
4.2
25 - 7
P1
Using the Payback Period
The payback period has two major shortcomings: It ignores the time value of money; and It ignores cash flows after the payback period. Consider the following example where both projects cost $5,000 and have five-year useful lives:
Outcome
is uncertain.
Large amounts of
money are usually involved.
Decision may be
difficult or impossible to reverse.
Investment involves a
long-term commitment.
25 - 19
P4
Comparing Capital Budgeting Methods
25 - 20
25 - 13
P3
Net Present Value Decision Rule
25 - 14
P3
Net Present Value with Uneven Cash Flows
Although all projects require the same investment and have the same total net cash flows, Project B has a higher net present value because of a larger net cash flow in Year 1.
P4Hale Waihona Puke Baidu
Internal Rate of Return (IRR)
1. Determine the present value factor. $12,000 ÷ $5,000 per year = 2.40 2. Using present value of annuity table. . .
IRR is approximately 12%.
Discount the future net cash flows from the investment at the required rate of return. Subtract the initial amount invested from sum of the discounted cash flows.
25 - 9
P2
Accounting Rate of Return
Let’s revisit the $16,000 investment being considered by FasTrac. The new machine has an annual after-tax net income of $2,100. Compute the accounting rate of return. Annual Average Investment Calculation Beginning book value $16,000 + Ending book value $0 2 Accounting rate of return $2,100 $8,000
25 - 18
P4
Internal Rate of Return (IRR)
Uneven Cash Flows
If cash inflows are unequal, trial and error solution will result if present value tables are used. Sophisticated business calculators and electronic spreadsheets can be used to easily solve these problems.
=
=
26.25%
25 - 10
P2
Accounting Rate of Return
Depreciation may be calculated several ways. Income may vary from year to year.
Time value of money is ignored.
25 - 11
P3
Net Present Value
Net present value analysis applies the time value of money to future cash inflows and cash outflows so management can evaluate a project’s benefits and costs at one point in time.
25 - 3
P1
Payback Period
The payback period of an investment is the time expected to recover the initial investment amount.
Managers prefer investing in projects with shorter payback periods.
25 - 16
P4
Internal Rate of Return (IRR)
Projects with even annual cash flows
Project life = 3 years Initial cost = $12,000 Annual net cash inflows = $5,000
$3,000 $4,000 $4,100 $5,000
25 - 6
P1
Computing Payback Period with Uneven Cash Flows
FasTrac wants to install a machine that costs $16,000 and has an 8-year useful life with zero salvage value. Annual net cash flows are:
25 - 12
P3
Net Present Value with Equal Cash Flows
FasTrac is considering the purchase of a conveyor costing $16,000, with an 8-year useful life and zero salvage value, that promises annual net cash flows of $4,100. FasTrac requires a 12 percent compounded annual return on its investments.
25 - 4
P1
Computing Payback Period with Even Cash Flows
FasTrac is considering buying a new machine that will be used in its manufacturing operations. The machine costs $16,000 and is expected to produce annual net cash flows of $4,100. The machine is expected to have an 8-year useful life with no salvage value.
25 - 8
P2
Accounting Rate of Return
Two Ways to Calculate Average Annual Investment
Choose the project with the least risk, the shortest payback period, and the highest return for the longest time period is often identified as the best.
Capital Budgeting and Managerial Decisions
Chapter 25
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
25 - 2
Capital Budgeting
Capital budgeting:
Analyzing alternative long-term investments and deciding which assets to acquire or sell.
Calculate the payback period.
Payback Cost of Investment = period Annual Net Cash Flow
Payback = period $16,000 $4,100
= 3.9 years
25 - 5
P1
Computing Payback Period with Uneven Cash Flows
Determine the IRR for this project.
1.
Compute present value factor. $12,000 ÷ $5,000 per year = 2.40
2. Using present value of annuity table . . .
25 - 17
Use of Internal Rate of Return Compare the internal rate of return on a project to a predetermined hurdle rate (cost of capital). To be acceptable, a project’s rate of return cannot be less than the company’s cost of capital.
Project One Net Cash Inflows $ 2,000 2,000 2,000 2,000 2,000 Project Two Net Cash Inflows $ 1,000 1,000 1,000 1,000 1,000,000
Year 1 2 3 4 5
Would you invest in Project One over Project Two just because it has a shorter payback period?
In the previous example, we assumed that the increase in cash flows would be the same each year. Now, let’s look at an example where the cash flows vary each year.
25 - 15
P4
Internal Rate of Return (IRR)
The interest rate that makes . . .
Present Present value of value of = cash inflows cash outflows
The net present value equals zero.
Payback is about 4.2 years.
4.2
25 - 7
P1
Using the Payback Period
The payback period has two major shortcomings: It ignores the time value of money; and It ignores cash flows after the payback period. Consider the following example where both projects cost $5,000 and have five-year useful lives:
Outcome
is uncertain.
Large amounts of
money are usually involved.
Decision may be
difficult or impossible to reverse.
Investment involves a
long-term commitment.
25 - 19
P4
Comparing Capital Budgeting Methods
25 - 20
25 - 13
P3
Net Present Value Decision Rule
25 - 14
P3
Net Present Value with Uneven Cash Flows
Although all projects require the same investment and have the same total net cash flows, Project B has a higher net present value because of a larger net cash flow in Year 1.
P4Hale Waihona Puke Baidu
Internal Rate of Return (IRR)
1. Determine the present value factor. $12,000 ÷ $5,000 per year = 2.40 2. Using present value of annuity table. . .
IRR is approximately 12%.
Discount the future net cash flows from the investment at the required rate of return. Subtract the initial amount invested from sum of the discounted cash flows.
25 - 9
P2
Accounting Rate of Return
Let’s revisit the $16,000 investment being considered by FasTrac. The new machine has an annual after-tax net income of $2,100. Compute the accounting rate of return. Annual Average Investment Calculation Beginning book value $16,000 + Ending book value $0 2 Accounting rate of return $2,100 $8,000
25 - 18
P4
Internal Rate of Return (IRR)
Uneven Cash Flows
If cash inflows are unequal, trial and error solution will result if present value tables are used. Sophisticated business calculators and electronic spreadsheets can be used to easily solve these problems.
=
=
26.25%
25 - 10
P2
Accounting Rate of Return
Depreciation may be calculated several ways. Income may vary from year to year.
Time value of money is ignored.
25 - 11
P3
Net Present Value
Net present value analysis applies the time value of money to future cash inflows and cash outflows so management can evaluate a project’s benefits and costs at one point in time.
25 - 3
P1
Payback Period
The payback period of an investment is the time expected to recover the initial investment amount.
Managers prefer investing in projects with shorter payback periods.
25 - 16
P4
Internal Rate of Return (IRR)
Projects with even annual cash flows
Project life = 3 years Initial cost = $12,000 Annual net cash inflows = $5,000
$3,000 $4,000 $4,100 $5,000
25 - 6
P1
Computing Payback Period with Uneven Cash Flows
FasTrac wants to install a machine that costs $16,000 and has an 8-year useful life with zero salvage value. Annual net cash flows are:
25 - 12
P3
Net Present Value with Equal Cash Flows
FasTrac is considering the purchase of a conveyor costing $16,000, with an 8-year useful life and zero salvage value, that promises annual net cash flows of $4,100. FasTrac requires a 12 percent compounded annual return on its investments.
25 - 4
P1
Computing Payback Period with Even Cash Flows
FasTrac is considering buying a new machine that will be used in its manufacturing operations. The machine costs $16,000 and is expected to produce annual net cash flows of $4,100. The machine is expected to have an 8-year useful life with no salvage value.
25 - 8
P2
Accounting Rate of Return
Two Ways to Calculate Average Annual Investment
Choose the project with the least risk, the shortest payback period, and the highest return for the longest time period is often identified as the best.