tailieunhanh - Lecture Intermediate corporate finance – Chapter 12: Capital budgeting: Decision criteria

Lecture Intermediate corporate finance – Chapter 12: Capital budgeting: Decision criteria. This chapter presents the following content: Overview and “vocabulary”; methods: NPV, IRR, MIRR, profitability index, payback, discounted payback; unequal lives; economic life. | Chapter 12 Capital Budgeting: Decision Criteria Topics Overview and “vocabulary” Methods NPV IRR, MIRR Profitability Index Payback, discounted payback Unequal lives Economic life What is capital budgeting? Analysis of potential projects. Long-term decisions; involve large expenditures. Very important to firm’s future. Steps in Capital Budgeting Estimate cash flows (inflows & outflows). Assess risk of cash flows. Determine r = WACC for project. Evaluate cash flows. Independent versus Mutually Exclusive Projects Projects are: independent, if the cash flows of one are unaffected by the acceptance of the other. mutually exclusive, if the cash flows of one can be adversely impacted by the acceptance of the other. Cash Flows for Franchise L and Franchise S 10 80 60 0 1 2 3 10% L’s CFs: 70 20 50 0 1 2 3 10% S’s CFs: NPV: Sum of the PVs of all cash flows. Cost often is CF0 and is negative. NPV = Σ N t = 0 CFt (1 + r)t NPV = Σ N t = 1 CFt (1 + r)t - CF0 What’s Franchise L’s NPV? 10 80 60 0 1 2 3 10% L’s CFs: = NPVL NPVS = $. Calculator Solution: Enter values in CFLO register for L. -100 10 60 80 10 CF0 CF1 NPV CF2 CF3 I/YR = = NPVL Rationale for the NPV Method NPV = PV inflows – Cost This is net gain in wealth, so accept project if NPV > 0. Choose between mutually exclusive projects on basis of higher NPV. Adds most value. Using NPV method, which franchise(s) should be accepted? If Franchise S and L are mutually exclusive, accept S because NPVs > NPVL . If S & L are independent, accept both; NPV > 0. Internal Rate of Return: IRR 0 1 2 3 CF0 CF1 CF2 CF3 Cost Inflows IRR is the discount rate that forces PV inflows = cost. This is the same as forcing NPV = 0. NPV: Enter r, solve for NPV. IRR: Enter NPV = 0, solve for IRR. = NPV Σ N t = 0 CFt (1 + r)t = 0 Σ N t = 0 CFt (1 + IRR)t = 0 What’s Franchise L’s IRR? 10 80 60 0 1 2 3 IRR = ? PV3 PV2 PV1 0 = NPV Enter . | Chapter 12 Capital Budgeting: Decision Criteria Topics Overview and “vocabulary” Methods NPV IRR, MIRR Profitability Index Payback, discounted payback Unequal lives Economic life What is capital budgeting? Analysis of potential projects. Long-term decisions; involve large expenditures. Very important to firm’s future. Steps in Capital Budgeting Estimate cash flows (inflows & outflows). Assess risk of cash flows. Determine r = WACC for project. Evaluate cash flows. Independent versus Mutually Exclusive Projects Projects are: independent, if the cash flows of one are unaffected by the acceptance of the other. mutually exclusive, if the cash flows of one can be adversely impacted by the acceptance of the other. Cash Flows for Franchise L and Franchise S 10 80 60 0 1 2 3 10% L’s CFs: 70 20 50 0 1 2 3 10% S’s CFs: NPV: Sum of the PVs of all cash flows. Cost often is CF0 and is negative. NPV = Σ N t = 0 CFt (1 + r)t NPV = Σ N t = 1 CFt (1 + r)t - CF0

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• Intermediate corporate finance
• Corporate finance
• Lecture Intermediate corporate finance
• Tài chính doanh nghiệp
• Capital budgeting
• Decision criteria
• Multi criteria decision making
• Combinative distance based
• Indian banks
• Hybrid unsupervised learning
• Multi criteria decision making approach
• Multi objective optimization
• Multi criteria decision making method
• Minimizing environmental emission
• Novel hybrid MCDM
• Vendor managed inventory
• Fuzzy multi criteria decision making approach
• Fuzzy Step wise Weight Assessment Ration Analysis
• Fuzzy Complex Proportional Assessment of Alternatives
• Information and communication technology
• E commerce websites
• Website evaluation
• Information sciences
• Argumentation in expert’s debate
• Analyze multi criteria
• Decision making method
• Multi criteria group decision making
• Area of inventory management
• Multi Criteria Inventory Management
• Multi criteria inventory classification
• Multi criteria driven holistic framework
• FIVE main criteria categories
• Research article green material selection
• An integrated fuzzy multi criteria decision making model
• Fuzzy multi criteria
• Green material selection
• Fuzzy analytical hierarchy process
• GIS Based multi criteria
• GIS Based multi criteria decision making model
• Seaweed farming information centre
• Southeast Maluku District
• Analytical hierarchy process
• Industrial revolution
• Multi criteria decision making system
• Staffs in campaign operations
• National defense tasks
• Decision making
• Data envelopment analysis
• Multi criteria transshipment problem
• Infectious waste management
• Fuzzy AHP technique
• Modified similarity based method
• TOPSIS and AHP
• Appropriate inventory control
• Hybrid decision making method
• Prioritize construction project portfolio
• Sustainable development criteria
• Lexicographic and sustainability criteria
• Project portfolio management
• Information Science
• Driven multi criteria source selection
• Multi criteria decision analysis
• Information retrieval
• Khoa học máy tính
• Tạp chí khoa học
• Picture fuzzy set
• Linguistic aggregation operator
• Sharpe index
• Treynor index
• Jensen’s alpha index
• Mutual Funds
• Multi criteria
• Picture fuzzy
• Water reuse
• Picture fuzzy sets
• Assessment involves analyzing
• Nuclear engineering and technology
• Development of earthquake instrumentation for shutdown
• Restart criteria of the nuclear power plant
• Multivariable decision making process
• The nuclear power plant
• Multi criteria decision making of machining parameters
• Die Sinking EDM Process
• The responses of MRR
• The responses of Ra
• The responses of OC
• Financial performance evaluation
• Topsis method
• Turkish banking sector
• Time series analysis
• Incomplete pairwise comparative judgment
• Weights of criteria
• Incomplete judgment decision matrice
• Multiplicative models face
• Complex neutrosophic set
• Distribution location selection
• Interval neutrosophic complex set
• Technique for Order of Preference
• Fuzzy Analytic Network Process
• Fuzzy Best Worst Method
• Fuzzy Analytical Network Process
• Fuzzy BWANP multi criteria decision making method
• Pair wise comparison
• Data collection method
• Banking system of Iran
• Credit risk model
• Multi criteria decision making models
• Customers’ financial data
• Interval valued TOPSIS
• Interval valued EDAS
• Interval valued CODAS
• Flexible manufacturing system
• Building maintenance contractor
• Multi criteria decision making methods
• Artificial neural network model
• Artificial Neural Network
• Spearman correlation coefficients