羅斯公司理財(cái)?shù)诎税娴诎苏?資料下載頁
2025-01-04 23:43本頁面
【正文】 nnual operating costs of $100, and lasts 10 years. The “Cheapskate cleaner” costs $1,000 today, has annual operating costs of $500, and lasts 5 years. Assuming a 10% discount rate, which one should we choose?,Investments of Unequal Lives,At first glance, the Cheapskate cleaner has a higher NPV.,10,–100,–4,614.46,– 4,000,10,5,–500,–2,895.39,–1,000,10,Investments of Unequal Lives,This overlooks the fact that the Cadillac cleaner lasts twice as long. When we incorporate that, the Cadillac cleaner is actually cheaper (i.e., has a higher NPV).,Investments of Unequal Lives,Replacement Chain Repeat projects until they begin and end at the same time. Compute NPV for the “repeated projects.” The Equivalent Annual Cost Method,Replacement Chain Approach,The Cadillac cleaner time line of cash flows:,The Cheapskate cleaner time line of cash flows over ten years:,Replacement Chain Approach,10,–100,–4,614,–4,000,10,4,–500,–4,693,–1,000,CF1,F1,CF0,I,NPV,10,1,–1,500,CF2,F2,5,–500,CF3,F3,Equivalent Annual Cost (EAC),Applicable to a much more robust set of circumstances than the replacement chain The EAC is the value of the level payment annuity that has the same PV as our original set of cash flows. For example, the EAC for the Cadillac air cleaner is $750.98. The EAC for the Cheapskate air cleaner is $763.80, which confirms our earlier decision to reject it.,Cadillac EAC with a Calculator,10,–100,–4,614.46,–4,000,10,750.98,10,–4,614.46,10,Cheapskate EAC with a Calculator,5,–500,–2,895.39,–1,000,10,763.80,10,2,895.39,5,Quick Quiz,How do we determine if cash flows are relevant to the capital budgeting decision? What are the different methods for computing operating cash flow, and when are they important? How should cash flows and discount rates be matched when inflation is present? What is equivalent annual cost, and when should it be us
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