财务管理第十章.pptx

财务管理第十章.pptx

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Chapter10,CapitalBudgetingandEstimatingCashFlows,AfterStudyingChapter10,youshouldbeableto:

Definecapitalbudgetingandidentifythestepsinvolvedinthecapitalbudgetingprocess.Explaintheproceduretogeneratelong-termprojectproposalswithinthefirm.Justifywhycash,notincome,flowsarethemostrelevanttocapitalbudgetingdecisions.Definetheterms“sunkcost”and“opportunitycost”andexplainwhysunkcostsmustbeignored,whileopportunitycostsmustbeincluded,incapitalbudgetinganalysis.Determineinitial,interim,andterminalperiod“after-tax,incremental,operatingcashflows”associatedwithacapitalinvestmentproject.,CapitalBudgetingandEstimatingCashFlows,TheCapitalBudgetingProcessGeneratingInvestmentProjectProposalsEstimatingProject“After-TaxIncrementalOperatingCashFlows”,WhatisCapitalBudgeting?

Theprocessofidentifying,analyzing,andselectinginvestmentprojectswhosereturns（cashflows）areexpectedtoextendbeyondoneyear.,TheCapitalBudgetingProcess,Generateinvestmentproposalsconsistentwiththefirmsstrategicobjectives.Estimateafter-taxincrementaloperatingcashflowsfortheinvestmentprojects.Evaluateprojectincrementalcashflows.,TheCapitalBudgetingProcess,Selectprojectsbasedonavalue-maximizingacceptancecriterion.Reevaluateimplementedinvestmentprojectscontinuallyandperformpostauditsforcompletedprojects.,ClassificationofInvestmentProjectProposals,1.Newproductsorexpansionofexistingproducts2.Replacementofexistingequipmentorbuildings3.Researchanddevelopment4.Exploration5.Other（e.g.,safetyorpollutionrelated）,ScreeningProposalsandDecisionMaking,1.SectionChiefs2.PlantManagers3.VPforOperations4.CapitalExpendituresCommittee5.President6.BoardofDirectors,Advancementtothenextleveldependsoncostandstrategicimportance.,EstimatingAfter-TaxIncrementalCashFlows,Cash（notaccountingincome）flowsOperating（notfinancing）flowsAfter-taxflowsIncrementalflows,Basiccharacteristicsofrelevantprojectflows,EstimatingAfter-TaxIncrementalCashFlows,IgnoresunkcostsIncludeopportunitycostsIncludeproject-drivenchangesinworkingcapitalnetofspontaneouschangesincurrentliabilitiesIncludeeffectsofinflation,Principlesthatmustbeadheredtointheestimation,CalculatingtheIncrementalCashFlows,Initialcashoutflowtheinitialnetcashinvestment.Interimincrementalnetcashflowsthosenetcashflowsoccurringaftertheinitialcashinvestmentbutnotincludingthefinalperiodscashflow.Terminal-yearincrementalnetcashflowsthefinalperiodsnetcashflow.,InitialCashOutflow,a）Costof“new”assetsb）+Capitalizedexpendituresc）+（）Increased（decreased）NWCd）Netproceedsfromsaleof“old”asset（s）ifreplacemente）+（）Taxes（savings）duetothesaleof“old”asset（s）ifreplacementf）=Initialcashoutflow,IncrementalCashFlows,a）Netincr.（decr.）inoperatingrevenueless（plus）anynetincr.（decr.）inoperatingexpenses,excludingdepr.b）（+）Netincr.（decr.）intaxdepreciationc）=Netchangeinincomebeforetaxesd）（+）Netincr.（decr.）intaxese）=Netchangeinincomeaftertaxesf）+（）Netincr.（decr.）intaxdepr.chargesg）=Incrementalnetcashflowforperiod,Terminal-YearIncrementalCashFlows,a）Calculatetheincrementalnetcashflowfortheterminalperiodb）+（）Salvagevalue（disposal/reclamationcosts）ofanysoldordisposedassetsc）（+）Taxes（taxsavings）duetoassetsaleordisposalof“new”assetsd）+（）Decreased（increased）levelof“net”workingcapitale）=Terminalyearincrementalnetcashflow,ExampleofanAssetExpansionProject,BasketWonders（BW）isconsideringthepurchaseofanewbasketweavingmachine.Themachinewillcost$50,000plus$20,000forshippingandinstallationandfallsunderthe3-yearMACRSclass.NWCwillriseby$5,000.LisaMillerforecaststhatrevenueswillincreaseby$110,000foreachofthenext4yearsandwillthenbesold（scrapped）for$10,000attheendofthefourthyear,whentheprojectends.Operatingcostswillriseby$70,000foreachofthenextfouryears.BWisinthe40%taxbracket.,InitialCashOutflow,a）$50,000b）+20,000c）+5,000d）0（notareplacement）e）+（）0（notareplacement）f）=$75,000*,*Notethatwehavecalculatedthisvalueasa“positive”becauseitisacashOUTFLOW（negative）.,IncrementalCashFlows,Year1Year2Year3Year4a）$40,000$40,000$40,000$40,000b）23,33131,11510,3675,187c）=$16,669$8,885$29,633$34,813d）6,6683,55411,85313,925e）=$10,001$5,331$17,780$20,888f）+23,33131,11510,3675,187g）=$33,332$36,446$28,147$26,075,Terminal-YearIncrementalCashFlows,a）$26,075TheincrementalcashflowfromthepreviousslideinYear4.b）+10,000SalvageValue.c）4,000.40*（$10,000-0）Note,theassetisfullydepreciatedattheendofYear4.d）+5,000NWC-Projectends.e）=$37,075Terminal-yearincrementalcashflow.,SummaryofProjectNetCashFlows,AssetExpansionYear0Year1Year2Year3Year4$75,000*$33,332$36,446$28,147$37,075*NoticeagainthatthisvalueisanegativecashflowaswecalculateditastheinitialcashOUTFLOWbefore.,