财务成本管理英语.docx
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财务成本管理英语.docx
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财务成本管理英语
公司内部编号:
(GOOD-TMMT-MMUT-UUPTY-UUYY-DTTI-9018)
财务成本管理英语
INVESTMENTAPPRAISAL
[对应中文教材2008年财务成本管理第五章:
投资管理]
A.ROCE(已动用资本回报率)orARR(会计收益率)(AccountingRateofReturn)
B.Payback(回收期法)
Paybackperiod
=Initialpayment/Annualcashinflow,paybackisnotalwaysanexactnumberofyears
Mostcommonformula:
ROCE=EBIT(afterdepreciation)/initialcapitalcosts
CNPV(净现值法)
(1)Basicassumptions:
·cashoutlayoccursinyear0(now).
·cashflowsoccurattheendoftheyear.
·ifacashflowoccursatthebeginningofayear,itisassumedtooccurattheendofthepreviousyear.
DIRR(内含报酬率法)
(1)Basicprinciple:
IRRisthecostofcapitalatwhichtheNPViszero,iftheexpectedIRRishigherthanatargetrateofreturn;theprojectisfinanciallyworthundertaking.
(2)SelectionbetweenIRRandNPV:
whenachoicehastobemadebetweenmutuallyexclusiveprojects,insuchcasetheNPVshouldbeselected,becausehigherNPVcanmaximizeshareholder’swealth.
Definition
Thediscountratwhich,whenappliedtothecashflowsofaproject,givesanNPVofzero.
Or
Thebreak-eveninterestrateforaproject.
Itisthemaximumrateofinterestthatyoucouldaffordtopayonaprojectwithoutmakingaloss.
Features
Advantages-Takesintoaccountthetimevalueofmoney
-Relativemeasure
-MorereadilyunderstoodthanNPV
Disadvantages-Maynotbeunique–projectscanhavemorethanoneIRR
-Mayrankprojectsincorrectly–formutuallyexclusiveprojectsorwhen
Fundsareshortsupply
-Cannotcopewithchangingratesofinterest
Themethodofcalculationdependsuponwhetherornottheprojecthasevencashflows.
Evencashflows
Consideraninvestmentof£39.93mthatgeneratesnetcashearningsof£10mfor5years
TheIRRisthediscountratethatgivesaNPVofzero.ThismeansthattheIRRisthe
Ratethatwilldiscountfiveinstallmentsof£10mtoapresentvalueof£39.93.Thisinturn
MeansthattheIRRisthediscountrateforwhichthe5yearannuityfactoris3.993.A
Theproject’sIRRhasbeenfoundviaacumulativediscountfactor(annuityfactor)given
By:
Annuityfactor
attheIRR=
forthelifeoftheproject
Unevencashflows
Thesehavetobefoundbytrialanderrororbyestimatingusingtwopresentvalues.
Where:
A=lowerratechosen
=NPVatrateA
B=higherrate
=NPVatrateB
IthelpstogetAandBasclosetothetrueIRRaspossible,butitdoesn’tmatterwhether
theresultantNPVsarepositive,negativeoroneofeach.
Somestudentsprefertouseacommonsenseapproachratherthanaformula.Seeingbynow
MuchNPVhasfallen(from
to
)asthediscountratehasrisenfromAtoB,
TheyfindhowmuchmorethediscountrateneedstorisetobringtheNPVtozero.
Whethertheformulaisusedorcommonsense,thecalculationassumesalinearrelationship
BetweenNPVanddiscountrate.Infacttherelationshipisnotlinear,hencethecalculation
Isonlyapproximateand(unlessyouhavebeenluckywhenguessingwhichdiscountratesto
use)youshouldnotquoteIRR’scalculatedinthiswaytomany,nottoany,decimalplaces–
unlesstheexaminerasksyou.
IRRofaperpetuity
Thepresentvalueofaperpetuityistheannualcashflowdividedbythediscountrate
(expressedasadecimal.Fromthisitfollowsthat:
theIRRofaperpetuity=
=100
Perpetuity:
永续年金
Methodofpresentation
AsimplecalculationsuchasthoseforWoodscanbedoneonasingleline.Forlargerprojects
twopossibilitiesexist:
(i)thecashbudgetapproach
(ii)thetabularapproach.
(1)Cashbudgetapproach
Time 0 1 2 3
£’000 £’000 £’000 £’000
Investment (X) — — X
Advertising (X) (X) - -
Workingcapital (X) - - X
Materials (X) (X) (X) -
Labour — (X) (X) (X)
Overheads — (X) (X) (X)
Revenue — — — X
— — — —
Netcashflow (X) (X) (X) X
— — — —
y%Discountfactor 1 X X X
Presentvalue (X) (X) (X) X
Netpresentvalue(£’000) X
Thecashbudgetapproachissuitableforshortprojectswithlotsofdifferentcashflows
Whichchangefromyeartoyear.
(2)Tabularapproach
Time Cashflow y%Discount Presentvalue
£’000 £’000 £’000
0 Investment (X) 1 (X)
0 and1Advertising (X) X (X)
0 Workingcapital (X) 1 (X)
0-9 Materials (X) 1 (X)
1-10 Labourandoverheads (X) X (X)
1-10 Revenue X X X
10 Salesproceeds X X X
10 WCrecovery X X X
—
Netpresentvalue(£’000) X
Thetabularapproachissuitableforlongprojectswithlotsofdifferentcashflowsthatare
Thesamefromyeartoyear(enablingannuityfactorstobeused).
Pickingtherightfigures
Whencarryingoutdiscountedcashflowanalysisitisimportanttoselecttherightfigures.
Ignore:
1.Sunkcosts–amountsthathavealreadybeenspent
2.Depreciation–notacashflow
3.Bookvalues–notacashflow
4.Non–incrementalfixedcosts(lookoutforthewords“reapportionedfixedoverheads”)
5.Interestcosts–takenintoaccountbythediscountingprocess
Include:
Thosecashflowsthatarespecificallyreceivedorincurredasaresultoftheacceptanceoftheproject(future–incremental–cashflows).
Assetreplacementdecision
Factorstobeconsideredwhenmakingreplacementdecisionareasfollows:
·capitalcostofnewequipment;
·operatingcosts,increasedrepairandmaintenancecosts;
lossofproductivity;
lowerofqualityandquantityofoutput;
Oneapplicationofdiscountedcashflowistomakedecisionsconcernedwiththereplacementof
Machinery.Thisappliestoshort–lifeassetsthatwillneedtobereplacedinperpetuity(e.g.motor
Carsorphotocopiers).Asamachinegetsolder,itislikelytocostmoretokeepitrunningandits
Scrapvaluewilldecrease.Theaimistofindtheoptimalreplacementcycleforthemachine,
i.e.howoftenitshouldbereplaced-beforeitbecomesuneconomictoown.
Asimpleapproachwouldinvolvefindingthetotalcostofkeepinganassetfor1,2,3years,etc,
Thenfindinganaverageannualcost.
DCFVersion
Now,eachpossiblereplacementcycleistreatedasaproject(1-year,2-year,or3-yearproject).
YoucalculatetheNPVofeachproject(ratherthanjustthetotalcost).
InsteadofdividingtheNPV’sby1,2,or3,they’redividedbythe1,2,or3-yearannuityfactor
Tofindanequivalentannualcost.
Equivalentannualcost=
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