【正文】 three reasons: (a) A measure of risk. Roughly, projects with shorter paybacks are less risky. (b) Obsolescence. If the risk of obsolescence is high, firms will want to recover funds quickly. (c) Selfinterest. Managers want quick paybacks so that shortrun performance measures are affected positively, enhancing chances for bonuses and promotion. 5. The accounting rate of return is the average ine divided by investment. 6. The cost of capital is the cost of investment funds and is usually viewed as the weighted average of the costs of funds from all sources. In capital budgeting, the cost of capital is the rate used to discount future cash flows. 7. Disagree. Only if the funds received each period from the investment are reinvested to earn the IRR will the IRR be the actual rate of return. 8. If NPV ? 0, then the investment is acceptable. If NPV 0, then the investment should be rejected. 9. NPV signals which investment maximizes firm value。 $5,000,000 ? ? . Note: The asset is disposed of at the end of the fifth year—the end of its class life—so the asset is held for its entire class life, and the full amount of depreciation can be claimed in Year 5. dPurchase cost ($5,000,000) less proceeds from sale of old puter ($500,000)。 otherwise, it is possible to miss out on a very profitable investment. The exclusion of the environmental fine is especially puzzling—it is easily quantified, and certainly its avoidance is an important savings. The effect on sales may also be estimated—there is already some indication that the pany is assessing this oute. Similarly, it should not be especially hard to get some handle on the potential litigation costs. There should be ample cases. Annual cash flows increase by $90,000 (fines and sales effect) [., cash inflows increase to $226,800 in Year 1 ($136,800 + $90,000) and $238,800 for Years 2–7 ($148,800 + $90,000)]. Payback: $ 226,800 year 193,200 ($193,200/$238,800) $ 420,000 years The payback is reduced by years. NPV is increased by the following amount: Fines and sales effect ($90,000 ? ) ..... $434,970 Lawsuit avoidance ($200,000 ? )......... 128,200 ................................ Total increase in NPV $ 563,170 The effect of the omitted factors is greater than the included factors. While this may not be the normal state, it emphasizes the importance of including all related factors in the analysis. As mentioned, their exclusion may cause a pany to pass up a profitable investment opportunity. 20–15 1. Traditional equipment (18% rate): Year Cash Flow df Present Value .................. 0 $(1,000,000) $(1,000,000) .................. 1 600,000 508,200 .................. 2 400,000 287,200 467 ............3–10 200,000 585,600 NPV .............................................................................................. $ 381,000 468 20–15 Continued Contemporary technology: Year Cash Flow df Present Value .................. 0 $(4,000,000) $(4,000,000) .................. 1 200,000 169,400 .................. 2 400,000 287,200 .................. 3 600,000 365,400 .............. 4–6 800,000 1,058,400 .................. 7 1,000,000 314,000 8–10 ................ 2,000,000 1,364,000 NPV .............................................................................................. $ (441,600) 2. Traditional equipment (14% rate): Year Cash Flow df Present Value .................. 0 $(1,000,000) $(1,000,000) .................. 1 600,000 526,200 .................. 2 400,000 307,600 ............3–10 200,000 714,200 NPV .............................................................................................. $ 548,000 Contemporary technology: Year Cash Flow df Present Value .................. 0 $(4,000,000) $(4,000,000) .................. 1 200,000 175,400 .................. 2 400,000 307,600 .................. 3 600,000 405,000 469 .............. 4–6 800,000 1,253,600 .................. 7 1,000,000 400,000 8–10 ................ 2,000,000 1,858,000 NPV .............................................................................................. $ 399,600 3. The cost of capital is the rate that should be used—it usually reflects the opportunity cost of the funds needed to make the investment. A higher rate will bias against the acceptance of contemporary technology—which usually has large initial outlays and larger returns later in the life of the project. Notice how the use of the 14% rate moved the NPV of the contemporary technology alternative from a negative to a positive value. It’s enough of a movement that qualitative factors could now lead to the contemporary technology alternative being selected even though the other alternative still has a larger NPV. 470 20–15 Concluded 4. Traditional equipment: Year Cash Flow df Present Value .................. 0 $(1,000,000) $(1,000,000) .................. 1 600,000 526,200 .................. 2 400,000 307,600 ............3–10 100,000 357,100 NPV .............................................................................................. $ 190,900 The decision reverses。 Year 3: ? $400,000. The class life has two years remaining。 $5,000,000 ? ? 。 IRR may provide misleading signals. IRR may be popular because it provides the correct signal most of the time, and managers are accustomed to working with rates of return. 10. NPV analysis is only as good as the accuracy of the cash flows. If cash flows are not accurate, then incorrect investment decisions can be made. 11. Gains and loss