投资净现值分析
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Use the cash flows to evaluate whether the investment is a good investment.
4. Time weight the cash flows
Use the time-weighted cash flows to evaluate whether the investment is a good investment.
Use the company’s costs of capital to evaluate its investments.
If the firm is in more than one business, but investments within each of business are similar:
投资净现值分析
2020年5月31日星期日
Contents
The concept of capital budgeting The steps of investment analysis Estimation of cost of capital Measure cash flows The approaches of capital budgeting
•2
What is a investment or a project?
Any decision that requires the use of resources (financial or otherwise) is a project.
Broad strategic decisions
Entering new areas of business Entering new market Investing in equipment to reduce costs Acquiring other companies
•3
•Financing decision(Capital Structure)
Use the divisional costs of capital to evaluate investments made by that division
•7
Example：
Suppose that a firm 100% equity funded, it has three divisions: (1) electronics which is occupied 30% of the firm’s market value, the cost of capital is 22%; (2) chemical department which has 40% of market value, its cost of capital is 17%; (3) nature gas transmission division has 30% of market value, the cost of capital is 14%.
•Investment decision(Capital Budgeting
What is Corporate Finance
talking about
Balance Sheet
•Cash Management
•Current Assets
•CurrentBaidu NhomakorabeaLiabilities
•Fixed Assets
5. Evaluate investment and make decisions
•6
Estimating the Hurdle Rate for an Investment
If a firm is in only one business, and all of its investments are homogeneous:
•Long-term Liabilities •Shareholder’s Equity
•Total
Assets
•Total Liabilities and
Shareholders Equity
•4
Capital budgeting
The process of analyzing investment decisions for a firm is called capital budgeting.
the weighted average cost of capital of the firm = 0.3×22%+0.4×17%+0.3×14% =17.6%
when we conduct capital budgeting for a project, assume it’s similar to electronic industry, if we use 17.6% as hurdle rate of the new investment, no doubt we would over value the investment, would make worry decision in the consequence. How we estimate the appropriate discount rate then?
We’ll look at how to use discounted cash flow (DCF) analysis and net present value (NPV) and other rules in capital budgeting decision making.
•5
Steps in Investment Analysis
1. Estimate a hurdle rate for the project, based upon the riskiness of the investment
2. Estimate revenues and accounting earnings on the investment.
3. Convert accounting earnings into cash flows
4. Time weight the cash flows
Use the time-weighted cash flows to evaluate whether the investment is a good investment.
Use the company’s costs of capital to evaluate its investments.
If the firm is in more than one business, but investments within each of business are similar:
投资净现值分析
2020年5月31日星期日
Contents
The concept of capital budgeting The steps of investment analysis Estimation of cost of capital Measure cash flows The approaches of capital budgeting
•2
What is a investment or a project?
Any decision that requires the use of resources (financial or otherwise) is a project.
Broad strategic decisions
Entering new areas of business Entering new market Investing in equipment to reduce costs Acquiring other companies
•3
•Financing decision(Capital Structure)
Use the divisional costs of capital to evaluate investments made by that division
•7
Example：
Suppose that a firm 100% equity funded, it has three divisions: (1) electronics which is occupied 30% of the firm’s market value, the cost of capital is 22%; (2) chemical department which has 40% of market value, its cost of capital is 17%; (3) nature gas transmission division has 30% of market value, the cost of capital is 14%.
•Investment decision(Capital Budgeting
What is Corporate Finance
talking about
Balance Sheet
•Cash Management
•Current Assets
•CurrentBaidu NhomakorabeaLiabilities
•Fixed Assets
5. Evaluate investment and make decisions
•6
Estimating the Hurdle Rate for an Investment
If a firm is in only one business, and all of its investments are homogeneous:
•Long-term Liabilities •Shareholder’s Equity
•Total
Assets
•Total Liabilities and
Shareholders Equity
•4
Capital budgeting
The process of analyzing investment decisions for a firm is called capital budgeting.
the weighted average cost of capital of the firm = 0.3×22%+0.4×17%+0.3×14% =17.6%
when we conduct capital budgeting for a project, assume it’s similar to electronic industry, if we use 17.6% as hurdle rate of the new investment, no doubt we would over value the investment, would make worry decision in the consequence. How we estimate the appropriate discount rate then?
We’ll look at how to use discounted cash flow (DCF) analysis and net present value (NPV) and other rules in capital budgeting decision making.
•5
Steps in Investment Analysis
1. Estimate a hurdle rate for the project, based upon the riskiness of the investment
2. Estimate revenues and accounting earnings on the investment.
3. Convert accounting earnings into cash flows