Chapter 5 Discounted Cash Flow Valuation5章现金流量折现法Word格式文档下载.docx
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-Opportunitycosts(alternativeuseforbuilding,land,etc.)
-Ifit’sareplacementproject,youmustconsider:
*Salvage(saleofoldasset)
*Taxconsequencesofsale(bookvaluevssellingprice)
2.Operatingcashflows:
Netcashflowsduringproject’slife
-Allafter-taxcashflowsfromoperations
-Additionalchangesinnetworkingcapital
-Ifareplacementproject:
annualadjustmenttodepreciation
3.Terminalyearcashflows:
Finalyearadjustments
-Cashflowsotherthanfromoperations
-Salvage(saleofnewassetattheendofitslife)
-Recoveryandreclamationofproperty(e.g.stripmining)
-Recoveryofinvestmentinnetworkingcapital
D.ACloserLookatNetWorkingCapital
HowChangesinNWCAffectCashFlow:
Anincreaseinanycurrentasset(+NWC)isacashoutflow(-Cash)
Adecreaseinanycurrentasset(-NWC)isacashinflow(+Cash)
Anincreaseinanycurrentliability(-NWC)isacashinflow(+Cash)
Adecreaseinanycurrentliability(+NWC)isacashoutflow(-Cash)
Cashoutflow(-cash)Cashinflow(+cash)
+Inventory-Inventory
+AccountsReceivable(AR)-AR
+Prepaidexpenses-Prepaidexpenses
+Buffercash(cashonhand)-Buffercash
-Wagesdue+Wagesdue
-AccountsPayable(AP)+AP
-NotesPayable(NP)+NP
-Deferredincometaxes+Deferredincometaxes
ChangesinNetWorkingCapital(NWC)
-Mayoccurintheinitialinvestmentyear
-Mayoccurinsubsequentyears
-Allmustbereversedintheterminalyear
WhyaccountforNetWorkingCapital?
-Increasesinworkingcapitaltieupresources
-Theseresourcescouldbeinvestedinotherassets
-Weneedtoaccountforthetimevalueofmoneytiedup
-Werecoupthoseassetsattheendoftheprojectslife
II.ProjectCashFlowExample:
ExpansionProject(2002-2006)(SeeSupplements,Table12.3Parts1-5)
1.Initialinvestmentcashflow:
-$12,000Costofbuilding(2002)
-$8,000CostofEquipment(2002)
-$6,000IncreaseinNWC(2002)
Totalinitialinvestment(2002):
$26,000
2.Annualcashflowsduringproject’slife:
Year1:
Year2:
etc.
SalesRevenue$60,000$61,200
OperatingCosts
Variable42,00042,840
Fixed8,0008,080
Total50,00050,920
Depreciation
Building156312
Equipment1,6002,560
Total1,7562,872
EBIT8,2447,408
Taxes(.40)3,2982,963
NetIncome4,9464,445
OperatingCashFlow6,7027,317
InvestmentinNWC(120)(122)
TotalNetCashFlow$6,582$7,195
3.Terminalyearcashflows(2006):
RecaptureofNWC:
$6,367
After-taxsalvagevalue:
Building$8,863
Equipment$1,744
Totalsalvage$10,607
Totalterminalyearcashflow$16,974
SalvageforBuilding:
SellingPrice$7,500*
Lessbookvalue-10,908
Profit(loss)onsale(3,408)
Taxesonprofit(loss)(.40)-(1,363)*
After-taxsalvagevalue$8,863
Easyformulaforafter-taxsalvagevalue:
SP-(SP–BV)t
$7,500–($7,500-$10,908).40=$8,863
SalvageforEquipment:
SellingPrice$2,000*
Lessbookvalue-1,360
Profit(loss)onsale640
Taxesonprofit(loss)(.40)-256*
After-taxsalvagevalue$1,744
$2,000–(.40)($2,000-$1,360)=$1,744
III.ModifiedAcceleratedCostRecoverySystemforDepreciation
Year
Depreciationrateforrecoveryperiod
3-year
5-year
7-year
1
33.33%
20.00%
14.29%
2
44.45
32.00
24.49
3
14.81
19.20
17.49
4
7.41
11.52
12.49
5
8.93
6
5.76
8.92
7
8
4.46
MACRSDepreciation:
∙Assignassettoappropriateasset-class(3-year,5-year,etc)
∙Multiplepercentagefromtablebythedepreciablebasis
∙Depreciatethatamounteachyearoftheasset’slife
Example:
A7-yearassetwitha$50,000depreciablebasis
Year1:
Depreciateassetby$50,000x.1429=$7,145
Year2:
Depreciateassetby$50,000x.2449=$12,245
Straight-lineDepreciation:
∙Dividethecostbythenumberofyearsoverwhichassetwillbedepreciatedtoarriveatannualdepreciation
∙Reducebookvalueeachyearbytheannualdepreciation
IV.What-IfAnalysis
*HelpsidentifyhowmuchriskexistsinNPVforecasts
*Scenarioanalysislooksatbasecase,worstcase,andbestcase
*Sensitivityanalysischangesasinglevariableatatime
A.ScenarioAnalysis:
Allinputvariablesandtheirinteraction
Thethreepossibleoutcomesare:
Basecase:
Mostlikelyoutcome
Worstcase:
Pessimisticoutcome
Bestcase:
Optimisticoutcome
Thethreepossiblevaluesforeachinputvariableare:
Upperbound:
Highestvalue
Lowerbound:
Lowestvalue
WaterT-BallManufacturing
Estimatesforfirstyear’sdemand,sellingprice,variablecostandfixedcostareprovidedbelow:
UPPERBASELOWER
Demand(Q)500,000300,000150,000
Price(P)$42.0033.5024.00
VariableCost(VC)$18.5015.0012.50
FixedCost(FC)$1MILL775,000500,000
Profit:
Q(P-VC)–FC
BASECASE:
300,000(33.50–15)–775,000=$4,775,000
BESTCASE:
500,000(42.00–12.50)–500,000=$14,250,000
WORSTCASE:
150,000(24.00–18.50)–1,000,000=($175,000)
B.SensitivityAnalysis:
Eachinputvariableisexaminedseparately
BeginningwithBASECASEfigures,changeonevariableatatimetoseehowsensitiveprofitistothatparticularvariable
QSensitivity:
1.500,000(33.50–15)–775,000=$8,475,000Bestcase
2.150,000(33.50–15)–775,000=$2,000,000Worstcase
PSensitivity:
1.300,000(42.00–15)–775,000=$7,325,000Bestcase
2.300,000(24.00–15)–775,000=$1,925,000Worstcase
VCSensitivity:
1.300,000(33.50–12.50)–775,000=$5,525,000Bestcase
2.300,000(33.50–18.50)–775,000=$3,725,000Worstcase
C.DecisionTrees:
-Decisiontreesaretoolsformakingdecisionswherealotofcomplexinformationneedstobetakenintoaccount.
-Theyprovideastructureinwhichsequentialdecisionscanbelaiddownandevaluated.
-Gatheringandevaluatinginformationatdifferentstagescanreduceuncertaintysurroundingtheinvestmentdecision.
1.DrawingaDecisionTree:
-Startwithadecisionthatneedstobemade.Representthisasthestartingpoint(node)onthetree(theorigin).
-Workingfromlefttoright,drawlinestorepresent:
a.Decisions(test-don’ttest,invest-don’tinvest)
b.Oroutcomesofthosedecisions(informationreceived)
-Decisionsandoutcomescanleadtofurtherdecisions.
a.Assigncosts/benefitstodecisions
b.Assignprobabilitiestooutcomes
c.Workfromrighttoleft,combinecost/benefitswithprobabilitiestoarriveatanexpectedvalueforthedecisionattheorigin.
Example1.WildCatDrillingWell:
ATwo-PeriodDecision(r=.10)
-Decisions:
(t=0)Drillanexploratorywell;
ordon’tdrill.Cost=$20m.
(t=1)Investinfurtherproductioncapacitygiventheoutcomeoftheexploratorywell;
ordon’tinvest.Cost=$100m.
-Outcomes:
(t=1)Successorfailureoftheexploratorywell.
(t=2)NPVfrominvestmentinproductioncapacity.
EvaluatingWildCatDrillingWell:
Asuccessfulexploratorywellpromisesa$30Mperpetuityfromt=1.
NPVt=1=$30m/.1-$100m=$300m–$100m=$200m
Anunsuccessfulexploratorywellpromisesa$7.5Mperpetuity.
NPVt=1=$7.5m/.1-$100m=$75m–$100m=-$25m
Probabilityofasuccessfulexploratorywell=.20
Probabilityofanunsuccessfulexploratorywell=.80
Iftheexploratorywellisunsuccessful,thecompanywillnotinvestfurther,sincetheNPVis-$25m.Thusthepresentvalueofcashinflowstobeexpectedis:
PVCIF=(.20x$200m/1.1)+(.8x0)
=$36.36m
PVCOF=$20m(Thecostoftheexploratorywell)
E(NPVt=0)=$36.36m–$20m=$16.36m
Decision:
InvestinexploratorywellsincetheNPVofthisinvestmentopportunityispositive.
Example2:
NewProductDevelopment
-Decisionatt=0isNewProductorConsolidate.
-Decisionatt=1dependsondecisionsatt=0.
-Netcashflowsforallposs