【正文】 350,000 = 26% 20–2 1. F = $5,000()2 = $5, 2. 4%: P = $50,000 ? = $39,500 6%: P = $50,000 ? = $35,250 8%: P = $50,000 ? = $31,800 3. CF(df) = $500,000 (where CF = Annual cash flow。 452 CHAPTER 20 CAPITAL INVESTMENT QUESTIONS FOR WRITING AND DISCUSSION 1. Independent projects are such that the acceptance of one does not preclude the acceptance of another. With mutually exclusive projects, however, acceptance of one precludes the acceptance of others. 2. The timing and quantity of cash flows determine the present value of a project. The present value is critical for assessing whether or not a project is acceptable. 3. By ignoring the time value of money, good projects can be rejected and bad projects accepted. 4. The payback period is the time required to recover the initial investment. It is used for 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。 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 losses on the sale of existing assets should be considered. 12. MACRS provides higher depreciation (a noncash expense) in earlier years than straightline does. Depreciation expense provides a cash inflow from the tax savings it produces. As a consequence, the present value of the shielding benefit is greater for MACRS. 13. Intangible and indirect benefits are important factors— more important in the avanced manufacturing and P2 environments. Greater quality, more reliability, reduced lead times, improved delivery, and the ability to maintain or increase market share are examples of intangible benefits. Reduction in support labor in such areas as scheduling and stores are indirect benefits. 14. A postaudit is a followup analysis of an investment decision. It pares the projected costs and benefits with the actual costs and benefits. It is especially valuable for advanced technology investments since it reveals intangible and indirect benefits that can be considered in similar investments in the future. 15. Sensitivity analysis involves changing assumptions to see how the changes affect the original oute. In capital investment decisions, sensitivity analysis can be used to help assess the risk of a project. Uncertainty in forecasted cash flows can be dealt with by altering projections to see how sensitive the decision is to errors in estimates. 453 EXERCISES 20–1 1. Payback period = $62,500/$15,625 = years 2. ARR = ($180,000 – $60,000)/$600,000 = 20% 3. Payback period: Cash Flow Unrecovered Investment Year 1 ...................... $ 87,500 $612,500 Year 2 ...................... 122,500 490,000 Year 3 ...................... 175,000 315,000 Year 4 ...................... 175,000 140,000 Year 5 ...................... 175,000* — *Only $140,000 is needed to finish recovery。 df = Discount factor) CF() = $500,000 CF = $500,000/ = $108,155 454 20–3 1. NPV = P – I = ( ? $1,000,000) – $6,000,000 = ($665,000) The system should not be purchased. 2. df = Investment/Annual cash flow = $1,350,000/$217,350 = IRR = 6% The decision is good. The oute covers the cost of capital. 20–4 1. Payback period = Original investment/Annual cash inflow = $2,340,000/($3,042,000 – $2,340,000) = $2,340,000/$702,000 = years 2. a. Initial investment (Depreciation = $468,000): Accounting rate of return = Average ine/Investment = ($702,000 – $468,000)/$2,340,000 = 10% b. Average investment: Accounting rate of return = ($702,000 – $468,000)/[($2,340,000 + $0)/2] = $234,000/$1,170,000 = 20% 3. Year Cash Flow Discount Factor Present Value 0 ................... $(2,340,000) $(2,340,000) 1–5 ................. 702,000 2,661,282 NPV ....................................................................................................... $ 321,282 4. P = CF(df) = I for the IRR, thus, df = Investment/Annual cash flow = $2,340,000/$702,000 = For five years and a df of , the IRR is between 14% and 16% (approximately %). 455 20–5 Xray equipment: Year Cash Flow Discount Factor Present Value 0 .................. $(750,000) $(750,000) 1 .................. 375,000 334,875 2 .................. 150,000 119,550 3 .................. 300,000 213,600 4 .................. 150,000 95,400 5 .................. 75,000 42,525 NPV ...................................................................................................... $ 55,950 Biopsy equipment: Year Cash F