《公司理财》相关资料(英文版).pptx

Chapter 8Making Capital Investment DecisionsKey Concepts and SkillsUnderstand how to determine the relevant cash flows for various types of capital investmentsBe able to compute depreciation expense for tax purposesIncorporate inflation into capital budgetingUnderstand the various methods for computing operating cash flowApply the Equivalent Annual Cost approachChapter Outline8.1 Incremental Cash Flows8.2 The Baldwin Company: An Example8.3 Inflation and Capital Budgeting8.4 Alternative Definitions of Cash Flow8.5 Investments of Unequal Lives: The Equivalent Annual Cost Method8.1 Incremental Cash FlowsCash flows matter—not accounting earnings.Sunk costs don’t matter.Incremental cash flows matter.Opportunity costs matter.Side effects like cannibalism and erosion matter.Taxes matter: we want incremental after-tax cash flows. Inflation matters.Cash Flows—Not AccountingConsider depreciation expense. You never write a check made out to “depreciation.”Much of the work in evaluating a project lies in taking accounting numbers and generating cash flows.Incremental Cash FlowsSunk costs are not relevantJust because “we have come this far” does not mean that we should continue to throw good money after bad.Opportunity costs do matter. Just because a project has a positive NPV, that does not mean that it should also have automatic acceptance. Specifically, if another project with a higher NPV would have to be passed up, then we should not proceed.Incremental Cash FlowsSide effects matter.Erosion and cannibalism are both bad things. If our new product causes existing customers to demand less of current products, we need to recognize that.If, however, synergies result that create increased demand of existing products, we also need to recognize that.Estimating Cash FlowsCash Flow from OperationsRecall that: OCF = EBIT – Taxes + DepreciationNet Capital SpendingDon’t forget salvage value (after tax, of course).Changes in Net Working CapitalRecall that when the project winds down,