第七章 货币预算 chapter7 capital budgeting..
资本预算-现金流量估算ppt课件
一、资本预算
• 1、什么是资本预算？
资本预算Capital Budgeting 长期投资决策 Long-term Investment decision
• 规划企业用于固定资产的资本支出，又称资本 支出预算。资本预算是企业选择长期资本资产 投资的过程。
税收的处理。即固定资产账面价值>市场价值，减免税金；账面价 值<市场价值，缴纳所得税）
一、现金流量的基本概念
1、现金流量
名称
符号
现金流量
Cash Flow
CFt
现金流出
现金流入
净现金流 量
Cash Flow Out CFOt
Cash Flow In CFIt
Net Cash Flow NCFt
含义
在考察对象一定时期各时 点上实际发生的资金流出
或资金流入。 流出系统的资金
流入系统的资金
• 税后现金流量
– 折旧的影响：折旧本身并不是真正的现金流，但它的数量大小会 直接影响到企业的应纳税所得额和企业的所得税支出，从而影响 到现金流入量的大小。
• 增量现金流量
– 沉没成本（忽略沉没成本） – 机会成本（包括机会成本） – 流动资产的净变动额 – 利息（全投资假设，不考虑利息） – 外部效果（正外部效果：现金流入；负外部效果：现金流出） – 税收（应为税后净现金流量，尤其注意计算固定资产残值收入时
– 机会成本是因为采取最优 方案而放弃的其他次优方 案的获利机会。
– 选择投资和放弃投资之间 的收益差是可能获取收益 的成本。
问题
机会成本是增量成本， 是与决策相关的成本。
2、营业现金流量的估算
Chapter 8 Capital Budgeting Decision Criteria：8章资本预算决策标准
Chapter 11: The Basics of Capital BudgetingI. What is Capital Budgeting?The process of determining what capital projects to acceptProject Classification is the starting point for determining the appropriate discount rate Replacement to maintain current operationsReplacement to reduce costsExpansion of existing products or marketsExpansion into new products or marketsPure research & development (example: pharmaceutical firms)Exploration (example: energy firms)Safety and /or environmental (government mandated) projectsII. Decision CriteriaWhat are the major investment decision criteria?Net Present Value - NPVInternal Rate of Return - IRRModified Internal Rate of Return - MIRRPayback Period - PaybackDiscounted Payback Period – Discounted PaybackProfitability Index - PIWhat are they used for?To evaluate the cash flows from capital investment projectsTo make the accept or reject decisionA. The NPV Rule:1. Why Is Net Present Value the Best Decision Criteria?- It considers the time value of money(TVM)… a dollar today is worth more than a dollar in the future- It considers all cash flows during the project’s entire life- NPV lets you know exactly how much value is being added by the project- You can set the appropriate require rate of return (discount rate or hurdle rate) depending on a project’s risk2. Calculating Net Present Value (NPV:NPV =CF0+ CF1 + CF2 + ... + CF tt3. The NPV decision (accept/reject) rule:- Accept the project (investment) if NPV > zero- Reject the project if NPV < zero4. What does a positive NPV mean?- The PV of cash inflows > PV of cash outflows- The value of the company is being increased by the amount of NPV- The project meets the required rate of return…and then someA friend asks you to invest $20,000 and promises to pay you $26,000 at the end of 2 years. Your required rate of return is 15%. Do you take the offer?NPV =CF0+ CF2NPV = -20,000 + 26,000 => -20,000 + 19,6601.15 2NPV = $-340 You should reject your friend’s offer!* If this were a capital investment project, acceptance would reduce the value of the company by $340!* Acceptance of the project would not increase the value of the company by $6,000! The key variable here is the required rate of return (or discount rate).The required rate of return (RRR) is:* The hurdle rate* The cost of capital (funds)* The best rate of return the company could expect on other projects of similar risk Note:In a competitive market, positive NPV projects are considered rare and require diligent effort to uncoverTwo projects with identical cash outflows (investment =$1,000) but different timing of cash inflows. Discount rate = 10%NPV for project S: (Large cash inflows come sooner)0 1 2 3 4|---------------|---------------|---------------|--------------|Net CF -1,000 500 400 300 100NPV(S) = $78.82NPV for project L: (Large cash inflows come later)0 1 2 3 4|---------------|---------------|---------------|--------------|Net CF -1,000 100 300 400 500NPV(L) = -$19.12B. The Payback Rule:Time period required for a project to generate enough cash inflows to recover the initial cost.The Payback decision (accept/reject) rule:- Accept if payback period < maximum acceptable payback period.- Reject if payback period > maximum acceptable payback period.Advantages- Easy to understand: the shorter the payback period, the better- Quick indicator of the liquidity risk of the project (how long funds will be tied up) Disadvantages- Ignores time value of money- Ignores cash flows beyond acceptable payback date- Acceptable payback date is usually an arbitrary cutoff point. Risk is not quantified in a required rate of return. The liquid ity risk is simply a “rule ofthumb”Project S:0 1 2 3 4|---------------|---------------|---------------|---------------|Net CF -1,000 500 400 300 100 Cumulative -1,000 -500 -100 200 300NCFPayback = years before + uncovered cost at end of yearfull recovery NCF during following year= 2 + 100/300= 2.33 yearsIf acceptable payback period is 2.33 or more years, you accept project SC. The Discounted Payback Rule:Time period required for a project to generate enough discounted cash inflows to recover the initial cost.The Discounted Payback decision (accept/reject) rule:- Accept if discounted payback period < maximum acceptable payback period.- Reject if discounted payback period > maximum acceptable payback period. Advantages- Easy to understand: the shorter the payback period, the better- Quick indicator of the liquidity risk of the project (how long funds will be tied up) - Does consider the time value of moneyDisadvantages- Ignores cash flows beyond acceptable payback date- Acceptable payback date is usually an arbitrary cutoff point.Project S: Assume a 10 percent discount rate0 1 2 3 4|---------------|---------------|---------------|---------------|Net CF -1,000 500 400 300 100PVNCF -1,000 454 331 225 68Cumulative -1,000 -546 -215 10PVNCFPayback = years before + uncovered cost at end of yearfull recovery NCF during following year= 2 + 215/225= 2.96 yearsIf acceptable payback period is 2.96 or more years, you accept project SD. Internal Rate of ReturnThe IRR is similar to a bond’s yield to maturity. It is the rate that makes the present value of cash inflows (CIF) equal to the present value of cash outflows (COF). Thus, it is the rate of return that results in a zero NPV when it is used as the discount rate.NPV = CF0+ CF1 + CF2 + ... + CF t(1 + r)1 (1 + r)2 (1 + r)t0 = CF0+ CF1 + CF2 + ... + CF t(1 + IRR) 1(1 + IRR) 2(1 + IRR)tIRR Decision Rule- Accept the project if IRR > req’d rate of return (discount rate)- Reject the project if IRR < req’d rate of return (discount r ate)Advantages- Considers TVM- Considers all cash flows- Easy to understandDisadvantages- May use unreasonable discount rate- Can conflict with NPV if projects are mutually exclusiveIRR Examples:IRR for Project S0 1 2 3 4Project S|---------------|---------------|---------------|---------------|-1,000 500 400 300 1000 = -1000 + 500 + 400 + 300 + 100(1+Irr) 1 (1+Irr) 2 (1+Irr) 3 (1+Irr)4Solve for the IRR. That is the discount rate that solves this equation and makes the answer (NPV) equal to zero.IRR for Project S = 14.49%IRR for Project L0 1 2 3 4Project L|---------------|---------------|---------------|----------------|-1,000 100 300 400 5000 = -1000 + 100 + 300 + 400 + 500(1+Irr) 1 (1+Irr) 2 (1+Irr) 3 (1+Irr)4IRR for Project L =9.27%The IRR is the most popular method, after NPV, for evaluating cash flows and is almost as good.Problems with IRR:There are problems with using IRR rather than NPV with you are choosing between mutually exclusive projects:- Independent projects: When evaluating multiple projects and any, none, or all of them can be accepted. Acceptance of any project has no bearing on the acceptance or rejection of another.- Mutually exclusive projects: When evaluating multiple projects and only one can be accepted. Acceptance of one project means rejection of the other(s).There is never a conflict between IRR and NPV criterion when evaluating independent projects. But when choosing between mutually exclusive projects, the IRR choice may conflict with the NPV choice under certain conditions.The Scale Problem: A potential conflict exists when there are significant differences in the size of the cash flows. An example would be if comparing a project with a $100,000 initial investment (COF) with another project with a $1,000,000 initial investment.The Timing Problem: A potential conflict exists when the timing of the cash flows for two projects are radically different. This can result in a conflict between the NPV choice and the IRR choice at low discount rates.Multiple IRRs: Projects with non-normal (non-conventional) cash flows may have multiple IRRs. A normal (or conventional) cash flow is a cash outflow at the beginning of a project, followed by cash inflows thereafter.The NPV Profile: NPV graphed against the discount rateRecall the NPV & IRR acceptance rules:NPV: Accept the project if NPV > zeroIRR: Accept the project if IRR > RRRNPVCash Flows-1000$300 500400300100IRR0 r.1449Any project with a positive NPV will also have an IRR that exceeds the discount rate (required rate of return).NPV Profiles for Mutually Exclusive Projects:NPV Cash FlowsExample: IRR vs NPV for Mutual Exclusive ProjectsCash FlowsA B-10,000 -10,00010,000 1,0001,000 1,0001,000 12,000IRR for A _____________ IRR for B is ___________ NPV at 0% ____________ NPV at 0% ____________ NPV at 10% ___________ NPV at 10% ___________ NPV at 15% ___________ NPV at 15% ___________ Which project is acceptable if they are independent? Why?Which project is acceptable if they are mutually exclusive? Why? E. Modified Internal Rate of Return- Accept the project if M IRR > req’d rate of return (discount rate) - Reject the project if M IRR < req’d rate of return (discount rate) Advantage: Let’s you decide the reinvestment rate!Cost = Terminal Value TGiven: Cost, TVSolve: MIRRF. Profitability Index (PI)PI = (PV of Cash Inflows)/(PV of Cash Outflows)The PI is the ratio of the PV of the project’s cash inflows to the PV of the project’s cash outflows.PI for Project SPVCIF S= 500 + 400 + 300 + 100 = 1,078.82(1+.10)1 (1+.10)2 (1+.10)3 (1+.10)4PVCOF S= 1,000PI S= 1,078.82/1,000 = 1.07882PI Decision Rule- Accept if PI > 1.00- Reject if PI < 1.00Advantages- Considers TVM- Considers all cash flows- Uses reasonable discount rate- Useful when faced with capital rationing.Disadvantages- Cannot distinguish projects of vastly different scale- May conflict with NPV when evaluating mutually exclusive projectsProfitability Index vs NPV for Mutually Exclusive Projects0 1|---------------------|Cash FlowsProject A -$10 $15Project B -$1,000 $1,250A BNPV at .10 $ 3.64 $136.36PI at .10 1.364 1.136According to NPV, you choose B.According to PI, you choose A.。
财务管理-chapter 7-资本预算
280 130 54 54
96
280 130 54 54
96 30 150 330
150
-150
150
150
150
例题—考虑所得税下的现金流量
某企业计划进行某项投资活动。该投资活动需要在 建设起点一次性投入固定资产200万元，无形资产25 万元。该项目建设期为2年，经营期为5年，无形资 产自投产年份起分5年摊销完毕。投产第一年预计流 动资产需用额为60万元，流动负债需用额为40万元； 投产第二年预计流动资产需用额为90万元，流动负 债需用额为30万元。该项目投产后，预计年营业收 入为210万元，年付现经营成本为80万元。该企业按 直线法折旧，且假定固定资产最终残值为10万元， 全部流动资金于终结点一次回收，所得税税率为33%。 计算项目各年净现金流量。
固定资产折旧=（200-10）/5=38 无形资产年摊销额=25/5=5 初始固定资产投资=200 初始无形资产投资=25 投产第一年流动资金需用额=60-40=20 投产第一年流动资金投资额=20-0=20 投产第二年流动资金需用额=90-30=60 投产第二年流动资金投资额=60-20=40 流动资金总投资额=20+40=60 经营期每年营业现金流=（210-80-38-5）*（1-33%） +38+5=101.29 终结点回收额=10+60=70
实体现金流量与股权现金流量的区别
某公司资本结构为负债资金占45%，所有者权益占 55%，负债的税后资本成本为6%，所有者权益的资 本成本为10%，则其加权平均资本成本为8.2%。若 公司正在考虑一个投资项目，该项目需要投资100万 元，预计每年产生税后息前现金流量为8.2元万元， 假设该项目可以不断地持续下去，即可以得到一个 永续年金。公司计划按当前资本结构筹集资金，即 负债资金45万元，权益资金55万元，假设税后利息 率是6%，企业为此每年要承担税后利息2.7万元，所 有者要求的报酬率为10%。
2_Capital Budgeting 资本预算
Capital Budgeting
-11-
Another Disadvantage of IRR
0.05
NPV $
0 -0.05 -0.1 -0.15 -0.2 0% 20% 40% 60% 80%
Interest Rate
IRR calculations produce multiple roots when the cash flows involves more than 1 sign change. If cash flows change from negative to positive to negative to positive, can get present value profile graph similar to this graph. None of the IRRs have any real meaning.
NPV ($)
5%
10%
15%
20%
Interest Rates (%)
The present value profile graphs the present value of the project cash flows for different interest rates. Longer term projects (where cash flows are earned later) are more sensitive to changes in interest rates and are steeper.
Capital Budgeting
Capital Budgeting
What is Capital Budgeting?
第七章 货币预算 chapter7 capital budgeting
EXAMPLE: Suppose a 10-year bond with a 9% annual coupon sells for $1,134.20.
Solve for IRR = YTM = 7.08%, the annual return for this project/bond.
Strengths
Provides an indication of a project’s risk and liquidity. Easy to calculate and understand. Ignores the time value of money. Ignores CFs occurring after the payback period.
Ch7 Basics of Capital Budgeting
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7-4
Decision-making Criteria in Capital Budgeting
How do we decide if a capital investment project, or Which capital investment project should be accepted or rejected?
CFt NPV t t 0 ( 1 k )
n
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Ch7 Basics of Capital Budgeting
7-16
What is Project L’s NPV?
Year 0 1 2 3 CFt -100 10 60 80 NPVL = PV of CFt -$100 9.09 49.59 60.11 $18.79
资本预算法则
4
应选择项目组合AB。
5
例5
2000 2000 1000 1000
0 3000 3000 5000
2 2 2 2.2
-438 1816 1899 2492
01
对于更新换代特别快的行业或资金匮乏的企业，资金的快速回收对企业的再发展至关重要。
但回收期只能作为净现值的一种补充，即应从净现值大于0的项目选择回收期短的项目。
02
回收期法的适用范围：
ABC ABD ABE BDE ACD ADE
99 84 78 96 96 75
66 81 66 102 84 84
（1）淘汰净现值为负数的F项目。 （2）将净现值为正的ABCDE五个项目在资本限额内进行各种可能的组合。
（3）选择净现值最大的组合BDE。
盈利指数越高，表明项目的回报率也越高，在资本有限的情况下，企业力求将资金投入回报高的项目中去。
1
2
第三节 有资本限制条件下的资本预算
例4
某企业可用于投资的资本总额为100万元，有下表的6个项目可供选择，请为该企业选择投资项目。
投资项目
初始投资(万元)
净现值(万元)
Aቤተ መጻሕፍቲ ባይዱB C D E F
15 36 48 33 27 15
9 27 30 45 30 -3
项目组合
初始投资(万元)
净现值总和(万元)
02
01
02
03
回收期法
第二节 资本预算方法
例1
项目
预期现金流
回收期（年）
0
1
2
3
项目A 项目B 项目C 项目D
-3000 -3000 -3000 -3000
资本预算现金流量估算
1、初始现金流量的估算
5、现金流量的类型
• 现金流量的估算原则 • 现金流量的估算实例
1. 独立项目的现金流量估算 2. 替代项目的现金流量估算
问题1
• 你认为评价该项目优劣，其基础应是会计利润，还是 现金流量？或者两者均可？
• 会计利润与现金流量的差异？
– 现金流量－收付实现制；会计利润－权责发生制 • 只要销售行为确定，无论现金是否收到，就要计入当期 销售收入。 • 购置固定资产时支出大量现金，但不计入成本； • 固定资产价值以折旧形式进入当期成本，企业并不付出 现金； • 企业因项目投资而垫支的流动资产，在计算当期利润时 无需加以考虑 现金流量更能考虑货币的时间价值。
现金流入－现金流出
2、现金流量图（时间轴）
• 现金流量图：一种反映经济系统资金运动状态的图
式，即把经济系统的现金流量绘入一时间坐标图中
，表示出各现金流入、流出与相应时间的对应关系
。
$130
$100 $100
0
1
2
3
4
5
$100 $100
• 现金流量的三要素
– 现金流量的大小(资金数额) – 方向(资金流入或流出) – 作用点(资金的发生时点)
• 项目将在第二年(t=1)开始投产，估计经济年限为5年，厂房和设 备从第二年开始采用直线折旧法进行折旧，项目终结时设备将全 部折旧完毕，无残值收入，公司预计厂房可以按30万元的价格出 售。
• 在项目投产的5年中，每年固定成本（除折旧外）为40万元，每 年的可变成本为192万元，企业的所得税税率为30%。且假定所 有收入和支出均发生在各年年底。
– 对现有行业及市场的新投资决策（如迪斯尼决定制作一 部新的儿童动画片的决策）
资本预算原理2515892376
资本预算原理2515892376Capital Budgeting前提：无杠杆公司，以后再讨论融资决策对资本预算的复杂阻碍。
第一节、推测以后收益〔forecasting earnings〕收益与真实的现金流不同，资本预算从推测因为项目投资而引起的预期收益变化——差量收益——开始。
HomeNet公司的差量收益推测1. 〔Incremental〕收入和成本估量2. 资本性支出与折旧3．利息费用4．税负5．机会成本〔opportunity cost〕如失去的租金6．项目的外部性〔project externalities〕如对相关产品销售量的负面阻碍7. 沉没成本(sunk cost) 如前期市场调查费用、固定制造费用、过去的研发支出等。
8．Real-World Complexities (price changes)1．Sales2．Cost of Goods Sold3．Gross Profit4．Selling, General, and Administrative5．Research and Development(注意是否资本化，假设是，那么无此项)6．Depreciation〔与资本性支出相联系〕7．EBIT8．Income Tax9．Unlevered Net Income第二节、决定自由现金流及运算NPV收益是对企业绩效的会计计量，企业不能够使用利润去购买商品、支付工资、进行新投资、发放股利等。
做上述情况，必须现金。
项目投资对企业可支配现金流带来的预期差量变化，称作项目的自由现金流。
调整项目：资本性支出与折旧NWC:净营运资本＝流淌资产 － 流淌负债＝现金 ＋ 存货 ＋应收 － 应对 〔典型项目〕1．Sales2．Cost of Goods Sold3．Gross Profit4．Selling, General, and Administrative5．Research and Development(注意是否资本化，假设是，那么无此项)6．Depreciation 〔与资本性支出相联系〕7．EBIT8．Income Tax9．Unlevered Net IncomeFree Cash Flow10. Plus: Depreciation11. Less: Capital Expenditures12. Less: Increases in NWC13. Free Cash Flow注释：1t t t NWC NWC NWC -∆=-直截了当运算自由现金流：Free Cash Flow =(Revenues –Costs-Depreciation )×(1-c τ)+ Depreciation – CapEx -∆NWC自由现金流(FCF)＝ (收入－付现成本)×(1－所得税率)－资本性支出－ 净营运资本的变动 ＋ 所得税率×折旧。
unit+7
如今的HP，作为全球领先的高科技公 司，在美国财富500强中名列第11，在全球 财富500强中名列第28，并在美国《商业周 刊》"全球最具价值品牌"中排名第13位。 HP当年创业的车库也被美国政府确立为硅 谷诞生地。HP的创新精神更是激发了千千 万万硅谷人的创业激情。
The two companies ,the world’s largest makers of software and personal computers respectively, planned to work together to develop, test, validate or ensure that products conform to standards and deploy new products, while also collaborating on sales and marketing.
present value (NPV) 净现值 Managers use a variety of rules to evaluate and select capital investments: Net Present value (NPV), Profitability index (PI), Internal rate of return (IRR), Payback period (PP), and Discounted payback period. 14.Discounted cash flow (DCF) 折现现金流 15.Fortune 500 财富500指数
Unit 7 Capital budgeting
wisdom:
You, academician, worry about making good decisions. In business, we also worry about making decisions good. ——Anonymous
宏观经济政策分析——财政政策题库42概念题
1．资本预算（capital budgeting ）答：资本预算是一种既衡量负债又衡量资产的预算程序，它考虑到了资本的变动。
采用资本预算，净国债等于政府资产减去政府负债。
按现行的预算程序，当政府出售其资产时，预算赤字会减少。
但在资本预算中，从出售中得到的收入并没有减少赤字，因为债务的减少被资产的减少所抵消了。
同样，在资本预算中，政府借贷为购买资本品筹资并不会增加赤字。
经济学家对资本预算的看法不一。
资本预算的反对者认为，虽然这个体系在原则上优于现行体系，但它在实践中难以实施。
资本预算的支持者认为，即使对资本资产的不完善处理也比完全忽略资本资产好。
2．对周期调整的预算赤字（cyclically adjusted budget deficit ）答：对周期调整的预算赤字有时称为充分就业预算赤字，它是根据对经济在其产出和就业自然率运行时政府支出与税收收入的估算而做出的。
对周期调整的预算赤字是一个有用的衡量指标，因为它反映了政策的变动，但并不反映经济周期的当前阶段。
5．政府购买乘数（government-purchases multiplier ）答：政府购买乘数指收入变动（Y ∆）对引起这种变动的政府购买支出变动（用G ∆表示）的比率。
政府购买乘数用△Y/△G 表示，△Y/△G=1/（1—MPC ），其中MPC 是边际消费倾向，而且边际消费倾向MPC 越大，政府购买乘数越大。
政府购买乘数说明，财政政策对收入有乘数效应。
原因是根据消费函数C=C(Y-T)，高收入引起高消费。
当政府购买增加时，提高了收入，同时也提高了消费，消费又进一步增加了收入，收入又进一步提高了消费，如此循环，以至政府购买的增加引起了收入更大的增加。
6．税收乘数（tax multiplier ）答：税收乘数指收入变动（Y ∆）对引起这种变动的税收变动（用T ∆表示）的比率，此时指的是税收总量的变化而不是税率的变化。
税收乘数用△Y/△T 表示，△Y/△T=－MPC/(1－MPC)，其中MPC 是边际消费倾向。
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Analysis of potential additions to fixed assets(or other long term assets). Long-term decisions; involve large expenditures. Very important to firm’s future.
30 / 80 1.6
30 0 2 50 20
= 2.375 years
3 20 40
Project S
CFt Cumulative PaybackS
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70 -30
= = 1
+
30 / 50
= 1.6 years
7-10
Ch7 Basics of Capital Budgeting
Payback rule:
Ch7 Basics of Capital Budgeting
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7-4
Decision-making Criteria in Capital Budgeting
How do we decide if a capital investment project, or Which capital investment project should be accepted or rejected?
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Independent and mutually exclusive projects
Independent projects – if the cash flows of one are unaffected by the acceptance of the other. Mutually exclusive projects – if the cash flows of one can be adversely impacted by the acceptance of the other.
CHAPTER 7 The Basics of
Capital Budgeting
Should we build this plant?
7-1
What is capital budgeting? P.250
The process of planning expenditures on assets whose cash flows are expected to extend beyond one year.
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7-8
Example:
2005年，武钢股份董事会决定对炼铁厂2号高 炉进行易地大修技术改造。 主要改造内容为建设一座3200m3高炉本体系统 及配套设施。设计年产炼钢生铁257.6万吨,一 代炉龄15年以上。预计2006年6月份建成投产。 该项目总投资12.98亿元(建设资金自筹),财务 内部收益率15.24%,投资回收期7.39年。
What is the payback period? The number of years required to recover a project’s cost, or “How long does it take to get our money back?” Calculated by adding project’s cash inflows to its cost until the cumulative cash flow for the project turns positive.
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7-6
Payback period Discounted payback period NPV IRR
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7-7
7.1 Payback period
security valuation
p.253
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7-3
Steps to capital budgeting
1.
2. 3.
4.
5.
Estimate CFs (inflows & outflows). Assess riskiness of CFs. Determine the appropriate cost of capital. Find capital budgeting measures (Payback period, or Discounted Payback period, or NPV, or IRR…). Decide according to Decision-making Criteria
Ch7 Basics of Capital Budgeting
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பைடு நூலகம்7-2
Capital budgeting is SIMILAR
to
•Cost?
•Cash flows? •Riskiness of cashflows? •Cost of capital? •Present value of cashflows vs. Cost?
•
The shorter the payback period, the better. If project L and S are independent: whether or not to accept them depends on firm’s requirement.
If project L and S are mutually exclusive, S will be accepted, for its payback period is shorter.
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7-9
Calculating payback
Project L CFt Cumulative PaybackL
0
-100 -100
1
10 -90
2
60 -30
2.4
30 0
3
80
50
= = 2
0 -100 -100
+
1