公司理財(cái)chap7-資料下載頁(yè)
2025-01-04 22:00本頁(yè)面
【正文】 with mutually exclusive investments Advantages: May be useful when available investment funds are limited Easy to understand and communicate Correct decision when evaluating independent projects,7.7 The Practice of Capital Budgeting,Varies by industry: Some firms use payback, others use accounting rate of return. The most frequently used technique for large corporations is IRR or NPV.,Summary – Discounted Cash Flow,Net present value Difference between market value and cost Accept the project if the NPV is positive Has no serious problems Preferred decision criterion Internal rate of return Discount rate that makes NPV = 0 Take the project if the IRR is greater than the required return Same decision as NPV with conventional cash flows IRR is unreliable with nonconventional cash flows or mutually exclusive projects Profitability Index Benefitcost ratio Take investment if PI 1 Cannot be used to rank mutually exclusive projects May be used to rank projects in the presence of capital rationing,Summary – Payback Criteria,Payback period Length of time until initial investment is recovered Take the project if it pays back in some specified period Does not account for time value of money, and there is an arbitrary cutoff period Discounted payback period Length of time until initial investment is recovered on a discounted basis Take the project if it pays back in some specified period There is an arbitrary cutoff period,Summary – Accounting Criterion,Average Accounting Return Measure of accounting profit relative to book value Similar to return on assets measure Take the investment if the AAR exceeds some specified return level Serious problems and should not be use
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