Lecture 6.: The Analysis of Investment projects (capital budgeting) Refer to ch.4&ch.6
Lecture 6: The Analysis of Investment projects (capital budgeting) 1 Refer to ch.4&ch.6
Chapter 6 Contents 6.1 The Nature of 6.6 Sensitivity Project Analysis Analysis Using Spreadsheets 6.2 Where do Investment ldeas 6.7 Analyzing Cost- come from? Reducing Projects 6.8 Projects with 6.3 The Net Present Different Lives Value Investment Rule 6.9 Ranking Mutually 6.4 Estimating a Exclusive Projects Project's Cash Flows 6.10 Inflation 6.5 Cost of Capital Capital Budgeting THE COURSE OF FINANCE 2017 SPRING SJTU ●2
Chapter 6 Contents 6.1 The Nature of Project Analysis 6.2 Where do Investment Ideas come from? 6.3 The Net Present Value Investment Rule 6.4 Estimating a Project’s Cash Flows 6.5 Cost of Capital 6.6 Sensitivity Analysis Using Spreadsheets 6.7 Analyzing Cost- Reducing Projects 6.8 Projects with Different Lives 6.9 Ranking Mutually Exclusive Projects 6.10 Inflation & Capital Budgeting THE COURSE OF FINANCE 2017 SPRING SJTU •2
Objective To show how to use discounted cash flow analysis to make investment decisions in business firms. THE COURSE OF FINANCE 2017 SPRING SJTU 3
Objective To show how to use discounted cash flow analysis to make investment decisions in business firms. THE COURSE OF FINANCE 2017 SPRING SJTU 3
Selected Contents 1.Firm's Investment Decision making rule: The Net Present Value (NPV,required) Internal Rate of Return (IRR,optional) 2.Cost of Capital D 3.Inflation Capital Budgeting The above contents are corresponding to 6.3/6.5/6.10 THE COURSE OF FINANCE 2017 SPRING SJTU 4
Selected Contents 1. Firm’s Investment Decision making rule: The Net Present Value (NPV, required) Internal Rate of Return (IRR, optional) 2.Cost of Capital 3.Inflation & Capital Budgeting The above contents are corresponding to 6.3/6.5/6.10 THE COURSE OF FINANCE 2017 SPRING SJTU 4
Firm's Investment Long term assets such as plant,equipment et. Most of them fall into three categories: New products Cost reduction Replacement THE COURSE OF FINANCE 2017 SPRING SJTU 5
Firm’s Investment Long term assets such as plant, equipment et. Most of them fall into three categories: New products Cost reduction Replacement THE COURSE OF FINANCE 2017 SPRING SJTU 5