宁波诺丁汉大学 国际经济与贸易 课件
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asset)
Firm
Shareholder
Investment opportunities (financial assets)
Invest
Alternative: pay dividend to shareholders
Shareholders invest for themselves
5- 4
NPV
4,000
2,000 (1 IRR )1
4,000 (1 IRR )2
0
5- 10
Internal Rate of Return
Example
You can purchase a turbo powered machine tool gadget for $4,000. The investment will generate $2,000 and $4,000 in cash flows for two years, respectively. What is the IRR on this investment?
Project
A B C
C0
C1 C2
- 2000 500 500
- 2000 500 1800
- 2000 1800 500
C3
5000 0 0
Payback Period
NPV@ 10%
5- 6
Payback
Example
Examine the three projects and note the mistake we would make if we insisted on only taking projects with a payback period of 2 years or less.
5- 9
Internal Rate of Return
Example
You can purchase a turbo powered machine tool gadget for $4,000. The investment will generate $2,000 and $4,000 in cash flows for two years, respectively. What is the IRR on this investment?
Project
A B C
C0
C1 C2
- 2000 500 500
- 2000 500 1800
- 2000 1800 500
C3
5000 0 0
Payback Period
3 2 2
NPV@ 10%
2,624 - 58 50
5- 7
Book Rate of Return
Book Rate of Return - Average income divided by average book value over project life. Also called accounting rate of return.
Book rate of return book income book assets
Managers rarely use this me来自百度文库surement to make decisions. The components reflect tax and accounting figures, not market values or cash flows.
5- 8
Internal Rate of Return
Example
You can purchase a turbo powered machine tool gadget for $4,000. The investment will generate $2,000 and $4,000 in cash flows for two years, respectively. What is the IRR on this investment?
5- 3
NPV and Cash Transfers
Every possible method for evaluating projects impacts the flow of cash about the company as follows.
Cash
Investment opportunity (real
Principles of Corporate Finance
Sixth Edition
Richard A. Brealey Stewart C. Myers
Chapter 5
Why Net Present Value Leads to Better Investment
Decisions than Other Criteria
This method is very flawed, primarily because it ignores later year cash flows and the the present value of future cash flows.
5- 5
Payback
Example
Examine the three projects and note the mistake we would make if we insisted on only taking projects with a payback period of 2 years or less.
Lu Yurong
McGraw Hill/Irwin
5- 2
Topics Covered
NPV and its Competitors The Payback Period The Book Rate of Return Internal Rate of Return Capital Rationing
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.
Firm
Shareholder
Investment opportunities (financial assets)
Invest
Alternative: pay dividend to shareholders
Shareholders invest for themselves
5- 4
NPV
4,000
2,000 (1 IRR )1
4,000 (1 IRR )2
0
5- 10
Internal Rate of Return
Example
You can purchase a turbo powered machine tool gadget for $4,000. The investment will generate $2,000 and $4,000 in cash flows for two years, respectively. What is the IRR on this investment?
Project
A B C
C0
C1 C2
- 2000 500 500
- 2000 500 1800
- 2000 1800 500
C3
5000 0 0
Payback Period
NPV@ 10%
5- 6
Payback
Example
Examine the three projects and note the mistake we would make if we insisted on only taking projects with a payback period of 2 years or less.
5- 9
Internal Rate of Return
Example
You can purchase a turbo powered machine tool gadget for $4,000. The investment will generate $2,000 and $4,000 in cash flows for two years, respectively. What is the IRR on this investment?
Project
A B C
C0
C1 C2
- 2000 500 500
- 2000 500 1800
- 2000 1800 500
C3
5000 0 0
Payback Period
3 2 2
NPV@ 10%
2,624 - 58 50
5- 7
Book Rate of Return
Book Rate of Return - Average income divided by average book value over project life. Also called accounting rate of return.
Book rate of return book income book assets
Managers rarely use this me来自百度文库surement to make decisions. The components reflect tax and accounting figures, not market values or cash flows.
5- 8
Internal Rate of Return
Example
You can purchase a turbo powered machine tool gadget for $4,000. The investment will generate $2,000 and $4,000 in cash flows for two years, respectively. What is the IRR on this investment?
5- 3
NPV and Cash Transfers
Every possible method for evaluating projects impacts the flow of cash about the company as follows.
Cash
Investment opportunity (real
Principles of Corporate Finance
Sixth Edition
Richard A. Brealey Stewart C. Myers
Chapter 5
Why Net Present Value Leads to Better Investment
Decisions than Other Criteria
This method is very flawed, primarily because it ignores later year cash flows and the the present value of future cash flows.
5- 5
Payback
Example
Examine the three projects and note the mistake we would make if we insisted on only taking projects with a payback period of 2 years or less.
Lu Yurong
McGraw Hill/Irwin
5- 2
Topics Covered
NPV and its Competitors The Payback Period The Book Rate of Return Internal Rate of Return Capital Rationing
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.