第17章长期投资分析17预算一种形式运营收入支出资本.pdfVIP

Long-Term Investment ysis Chapter 17 • Budgeting is a form of nning »Operational Budgeting -- revenues expenses »Capital Budgeting – is the nning and evaluation capital expenditures (which are assets that last more than a year) • even more significant, s e capital projects will impact the firm for many years to come • Problem of Limits: »Every manager wants more equipment, more s, more buildings, more employees »The issue is to accept good projects, and forego others 2008 Thomson * South-Western Ozone Depletion and Greenhouse Gases • Very long term projects can look good or bad depending on the discount rate used » Low discount rates mean the future benefits are larger and are more worthwhile » High discount rates mean that future benefits are very small, and less valuable. • The impact of greenhouse gasses is long term damage that makes benefit-cost ysis difficult • Suppose $100 billion damage in 100 years, what would or should we spend today to avoid it. » At 2%, we would be willing to spend up to $13.8 billion to avoid $100 billion in 100 years » At 7%, we would be willing only to spend up to $1.15 billion The Capital Budgeting Process 1. Generate alternative capital investment project proposals ➢ Often each department head offers several proposals 2. Estimate cast flows for each project proposal ➢ Be sure to lude all the costs and revenue impacts 3. Evaluate and choose from these alternatives the projects to implement ➢ NPV, IRR, payback methods discussed later 4. Review the investment projects after they have been implemented. ➢ The hope is that we learn from our past mistakes Estimat