公司理财第五版高等院校双语教材·金融系列-chapter 8(PPT 18页).ppt

Chapter 8
Using discounted cash-flow analysis to make investment decisions
1
COPYRIGHT©ZHULI
Objectives
Identify the cash flows properly attributable to a proposed new project
Calculate the cash flows of a project from standard financial statements
Understand how pany’s tax bill is affected by depreciation and how this affects project value
Understand how changes in working capital affect project cash flows
2
COPYRIGHT©ZHULI
Content
Identifying cash flows
Calculating cash flow
An example: Blooper industries
3
COPYRIGHT©ZHULI
Discount cash flows, not profits
When calculating NPV, recognize investment expenditures when they occur, not later when they show un as depreciation. Projects are financially attractive because of the cash they generate, either for distribution to shareholders or for reinvestment in the firm. Therefore, the focus of capital budgeting must be on cash flow, not profits
4
COPYRIGHT©ZHULI
Discount incremental cash flows
Include all indirect effects
Forget sunk costs: sunk costs remain the same whether or not you accept the project
Include opportunity cost: benefit or cash flow forgone as a result of an action
Recognize the investment in working capital: investments in working capital, just like investments in plant and equipment, result in cash outflows
Beware of allocated overhead costs
5
COPYRIGHT©ZHULI
Discount nominal cash flows by the nominal cost of capital
You cannot mix and match real and nominal quantities
Real cash flows must be discounted at a real discount rate, nominal cash flows at a nominal rate
Separate investment and financing decisions
First, we determine whether the project has a positive NPV, assuming all-equity financing
Then, if the project is viable, we can undertake a separate analysis of the best financing strategy
6
COPYRIGHT©ZHULI
Incremental cash flows: 增量现金流量
Sunk cost: 沉没成本
Working capital: 营运资本
7
COPYRIGHT©ZHULI
Content
Identifying cash flows
Calculating cash flow
An example: Blooper ind