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1、英文版公司理财chapter-8(1),1,Chapter 8,Using discounted cash-flow analysis to make investment decisions,英文版公司理财chapter-8(1),2,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 the compan
2、ys tax bill is affected by depreciation and how this affects project value Understand how changes in working capital affect project cash flows,英文版公司理财chapter-8(1),3,Content,Identifying cash flows Calculating cash flow An example: Blooper industries,英文版公司理财chapter-8(1),4,Incremental cash flows: 增量现金流
3、量 Sunk cost: 沉没成本 Working capital: 营运资本,英文版公司理财chapter-8(1),5,we have been concerned mainly with the mechanics of discounting and with the various methods of project appraisal. We have glossed over the problem of deciding what to discount. When you are faced with this problem, you should always stic
4、k to three general rules: 1. Only cash flow is relevant. 2. Always estimate cash flows on an incremental basis. 3. Be consistent in your treatment of inflation.,英文版公司理财chapter-8(1),6,When calculating NPV, recognize investment expenditures when they occur, not later when they show up as depreciation.
5、 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,Discount cash flows, not profits,英文版公司理财chapter-8(1),7,to obtain accounting inc
6、ome accountants adjust inputs in two important ways. First, they try to show profit as it is earned rather than when the company and the customer get around to paying their bills. Second, they sort cash outflows into two categories: current expenses and capital expenses. They deduct current expenses
7、 when calculating profit but do not deduct capital expenses.,英文版公司理财chapter-8(1),8,Instead they depreciate capital expenses over a number of years and deduct the annual depreciation charge from profits. As a result of these procedures, profits include some cash flows and exclude others, and they are
8、 reduced by depreciation charges, which are not cash flows at all.,英文版公司理财chapter-8(1),9,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 inve
9、stment in working capital: investments in working capital, just like investments in plant and equipment, result in cash outflows Beware of allocated overhead costs,Discount incremental cash flows,incremental cash flow,=,cash flow with project,cash flow without project,英文版公司理财chapter-8(1),10,Forget S
10、unk Costs,Sunk costs are like spilled milk: They are past and irreversible outflows. Because sunk costs are bygones, they cannot be affected by the decision to accept or reject the project, and so they should be ignored.,英文版公司理财chapter-8(1),11,Include Opportunity Costs,The cost of a resource may be
11、relevant to the investment decision even when no cash changes hands.,英文版公司理财chapter-8(1),12,Include All Incidental Effects,It is important to include all incidental effects on the remainder of the business. For example, a branch line for a railroad may have a negative NPV when considered in isolatio
12、n, but still be a worthwhile investment when one allows for the additional traffic that it brings to the main line.,英文版公司理财chapter-8(1),13,Do Not Forget Working Capital Requirements,Net working capital (often referred to simply as working capital) is the difference between a companys short term asse
13、ts and liabilities. Most projects entail an additional investment in working capital. This investment should, therefore, be recognized in your cash-flow forecasts. By the same token, when the project comes to an end, you can usually recover some of the investment. This is treated as a cash inflow.,英
14、文版公司理财chapter-8(1),14,Beware of Allocated Overhead Costs,A project may generate extra overhead expenses; then again, it may not. We should be cautious about assuming that the accountants allocation of overheads represent the true extra expenses that would be incurred.,英文版公司理财chapter-8(1),15,You cann
15、ot 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,Discount nominal cash flows by the nominal cost of capital,英文版公司理财chapter-8(1),16,Separate investment and financing decisions,First, we determine whether the
16、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,英文版公司理财chapter-8(1),17,Content,Identifying cash flows Calculating cash flow An example: Blooper industries,英文版公司理财chapter-8(1),18,Capital investment: 资本投资 Investment in working capital: 营运资本投资 Cash flow from operations: 营业现金流量、经营活动所产生的现金流量 Cash expenses: 付现成本 After-tax profit: 税后净利润 Tax shield: 税盾效应,英文版公司理财chapter-8(1),19,A project is progr
