厦门大学管理学院博士研究生课程报告八 高级投资项目管理和经济效益评价 理论 方法和实践厦门大学管理学院吴世农AdvancedCapitalBudgeting Theory Methods ApplicationsWuShinongSchoolofManagementXiamenUniversity AdvancedTopicsinCapitalBudgeting I WhatisCapitalBudgeting Capital FixedAssetsusedinproduction service Budgeting Plandetailingprojectedcashinflowsandoutflowsduringsomefutureperiod thus CapitalBudgeting outlinestheplannedexpendituresonfixedassets 1 Multi conceptsforCapitalBudgeting 1 CapitalInvestmentAnalysis Decision 2 EconomicEvaluationofInvestmentProjects 3 TechnologicalEconomics 4 InvestmentFeasibilityStudy2 AFormalDefinitionofCapitalBudgetingCapitalbudgetingisafiledoffinanceconcernedwithcostandbenefit andreturnandriskderivedfrominvestmentprojectundertakenbyafirm Thecapitalbudgetingisaprocedureincludeasetofsystematictechniquesdealingwithhowtoevaluateandselectinvestmentprojectsundercertaintyoruncertainty 厦门大学管理学院吴世农 MarketResearchInvestmentSources CostCBAExpendituresofCapitalsMarketingStrategyCosts IncomeRProfitsStatementRisk InvestmentAnalysisDManagementAssets BalanceLiabilitiesSheetProductionFinanceCashInflow CashflowRepaymentOpportunityStudyCashOutflowStatementAnalysisPreliminaryDiscussionFeasibilityDiscussionFinalProposalsStudyReportExhibit1 DiagramSuggestedforInvestmentProject sFeasibilityStudyinFirms 厦门大学管理学院吴世农 TechnologicalMacroeconomicFeasibilityFeasibilityFinancialImplementationOperationFeasibilitySocial CulturalEnvironmentalFeasibilityFeasibilityComprehensiveReviewPost FeasibilityReportAssessmentExhibit1 Continuos DiagramSuggestedforInvestmentProject sFeasibilityStudyinFirms AdvancedTopicsinCapitalBudgeting II ConflictsbetweenNPVandIRRforMutuallyExclusiveProjects1 SizeEffectofInvestmentOutlayonNPVandIRR 1 Conflict WhichMaximizesShareholder sWealth Supposethattherearetwoprojects AandB n 1 K 10 theirinvestmentoutlaysandNCFarepresentedinthefollowingtable ProjectI0NCF1NPV k 10 IRRPVIA5 0008 0002 27360 45 46 B50 00075 00018 18250 36 36 BothprojectsareacceptableduetotheirpositivevaluesofNPV however giventhatthetwoprojectsaremutuallyexclusive whichoneispreferred Also becausethesizeofinvestmentoutlaysforAandBaredifferent ByNPV AisbetterthanB byIRR orPVI BisoverA ThiscaseistypicalasaconflictraisedfromdecisioncriteriabyNPVorbyIRR 厦门大学吴世农 2 SolutionSinceK 10 isassumedtobefixed wecansolvethisconflictbycreatingadifferentialproject B A ifthedifferentialprojectyieldsapositiveNPV itisobviousthatBisbetterthanAbecausenotonlyapartofBwillcreateaNPVequaltoNPVA butalsocreateapositiveNPVforthedifferentialproject B A Thus wecreateadifferentialproject B A andthencalculateitsNPVandIRRNPV B A 75000 8000 1 10 50000 5000 15909 75000 8000 1 IRR B A 50000 5000 IRR B A 48 8 Nodoubt theresultsabovesuggeststhattheinvestorsofthefirmwillbebetteroffifprojectBisaccepted AdvancedTopicsinCapitalBudgeting 2 TrendEffectofNCFonNPVandIRR 1 Conflict WhichOneisaSoundingDecisionRule Supposetherearetwomutuallyexclusiveprojects AandB thefollowinggraphsshowthatthetrendofA sNCFsandthetrendofB sNCFsaredifferent Obviously graph1statesthatA sNCFsarealwayslargerthanB sNCFsovertheperiods thus NPVA NPVB graph2statesfortheearlierperiodsA sNCFsarelargerthanB sNCFs thusNPVA NPVB butforthelaterperiods afterK A sNCFsaresmallerthanB sNCFs thusNPVANPVBBANPVA NPVBNPVA NPVBKNPVA NPVBKkIRRB IRRAk IRRA IRRB 厦门大学吴世农 Forgraph1 projectAwillbechosenforinvestmentwhileprojectbewillbegivenup Thedecisionisclear Forgraph2 itishardtosaywhichoneisbetter Thequestioncannotbeanswereduntilwedoafurtherstudy 2 SolutionToillustratethecaseshowningraph2 thefollowingtablecontainsnecessaryinformationformakingtheaccept rejectdecision ProjectI0NCF1NCF2NPV K 10 IRRNPV K 20 A10001000310165 324 8 48 6B10002001200173 620 0Toanswerthequestionforthecaseofgraph2 wehastocreateadifferentialproject B A weregardthedifferenceofB sNCFandA NCFinthefirstyear NCF1B NCF1A asI1 whichisanegativevalue orcashoutflow AlsowetreatedthedifferenceofB sNCFandA NCFinthesecondyear NCF2B NCF1A asNCF1 whichisapositivevalue orcashinflow Thusthedifferentialproject sNPVandIRRcanbeshownasfollows AdvancedTopicsinCapitalBudgeting NPV B A 890 1 10 800 9 1 890 1 IRR B A 800 IRR B A 11 23 Bythecalculationsabove itsuggeststhatprojectBisbetterthanprojectA 3 SignEffectofNCFsonNPVandIRR 1 Conflict WhichOneisApplicable Weonediscussedaclassificationofcashflows conventionalNCFandnon conventionalNCF therationalbehindthisclassificationistoidentifyapplicabilityofcapitalbudgetingtechniques particularlyforNPVandIRR Ifaproject sstreamofestimatedNCFschangessignmorethanonce thestreamofNCFsisnon conventional Inthiscase IRRisnotapplicablebecauseitcanresultinmultipleratesofreturn Why AsimpleanswertothisquestionisthatifthestreamofNCFschangessignmorethanonetime mathematically solvingtheequationofIRRwillresultsinmorethanonesolutions MultipleRatesofReturns 厦门大学吴世农 Geometrically themultipleratesofreturncanbeshowninthefollowinggraph NPV0KSomeStudiesshowthatcashflowsofinvestmentprojectswerehighlyassociatedwitheconomicenvironment marketcompetition managementabilityandmanyothers Inpractice itiscommonthat