投资决策的其它方案讲义(ppt 25页)（英文版）

投资决策的其它方案讲义目录：
1、Why Use Net Present Value?
2、The Payback Period Rule
3、The Discounted Payback Period Rule
4、The Average Accounting Return
5、The Internal Rate of Return
6、Problems with the IRR Approach
7、The Profitability Index
8、The Practice of Capital Budgeting
9、Summary and Conclusions

 

投资决策的其它方案讲义内容提要：
The Payback Period Rule
How long does it take the project to “pay back” its initial investment?
Payback Period = number of years to recover initial costs
Minimum Acceptance Criteria:
set by management
Ranking Criteria:
set by management
The Payback Period Rule (continued)
Disadvantages:
Ignores the time value of money
Ignores cash flows after the payback period
Biased against long-term projects
Requires an arbitrary acceptance criteria
A project accepted based on the payback criteria may not have a positive NPV
Advantages:
Easy to understand
Biased toward liquidity
The Discounted Payback Period Rule
How long does it take the project to “pay back” its initial investment taking the time value of money into account?
By the time you have discounted the cash flows, you might as well calculate the NPV.
The Average Accounting Return Rule
Another attractive but fatally flawed approach.
Ranking Criteria and Minimum Acceptance Criteria set by management
Disadvantages:
Ignores the time value of money
Uses an arbitrary benchmark cutoff rate
Based on book values, not cash flows and market values
Advantages:
The accounting information is usually available
Easy to calculate
The Internal Rate of Return (IRR) Rule
IRR: the discount that sets NPV to zero
Minimum Acceptance Criteria:
Accept if the IRR exceeds the required return.
Ranking Criteria:
Select alternative with the highest IRR
Reinvestment assumption:
All future cash flows assumed reinvested at the IRR.
Disadvantages:
Does not distinguish between investing and borrowing.
IRR may not exist or there may be multiple IRR
Problems with mutually exclusive investments
Advantages:
Easy to understand and communicate.

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