第八章公司戰(zhàn)略和凈現(xiàn)值分析

1、McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-0Chapter Outline8.1 Corporate Strategy and Positive NPV8.2 Decision Trees8.3 Sensitivity Analysis, Scenario Analysis, and Break-Even Analysis8.4 Options8.5 Summary and ConclusionsMcGraw-Hill/IrwinCopyright 2002

2、by The McGraw-Hill Companies, Inc. All rights reserved.8-1Introduce new products Apple Corporation and the mouseDevelop core technology Honda and small enginesCreate barrier to entry Qualcomms patents on proprietary technologyIntroduce variations on existing products Chryslers PT CruiserCreate produ

3、ct differentiation Coca-Colaits the real thingUtilize organizational innovation Motorola just-in-time inventory managementExploit a new technology Yahoo!s use of banner advertisements on the web Corporate Strategy and Positive NPVMcGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All

4、 rights reserved.8-2Corporate Strategy and the Stock Market There should be a connection between the stock market and capital budgeting. If the firm invests in a positive NPV projects, the firms stock price should go up. Sometimes the stock market provides negative clues as to a new projects NPV. Co

5、nsider AT&Ts repeated attempts to penetrate the computer-manufacturing industry.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-38.2 Decision Trees Allow us to graphically represent the alternatives available to us in each period and the likely consequenc

6、es of our actions.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-4Example of Decision TreeDo not studyStudy financeOpen circles represent decisions to be made.Filled circles represent receipt of information e.g. a test score in this class.The lines leading a

7、way from the circles represent the alternatives.“C”“A”“B”“F”“D”McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-5Stewart Pharmaceuticals The Stewart Pharmaceuticals Corporation is considering investing in developing a drug that cures the common cold. A corpora

8、te planning group, including representatives from production, marketing, and engineering, has recommended that the firm go ahead with the test and development phase. This preliminary phase will last one year and cost $1billion. Furthermore, the group believes that there is a 60% chance that tests wi

9、ll prove successful. If the initial tests are successful, Stewart Pharmaceuticals can go ahead with full-scale production. This investment phase will cost $1,600 million. Production will occur over the next 4 years.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserve

10、d.8-6Stewart Pharmaceuticals NPV of Full-Scale Production following Successful TestNote that the NPV is calculated as of date 1, the date at which the investment of $1,600 million is made. Later we bring this number back to date 0. InvestmentYear 1Years 2-5Revenues$7,000Variable Costs(3,000)Fixed Co

11、sts(1,800)Depreciation(400)Pretax profit$1,800Tax (34%)(612)Net Profit$1,188Cash Flow-$1,600$1,58875.433, 3$)10. 1 (588, 1$600, 1$41ttNPVMcGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-7Decision Tree for Stewart PharmaceuticalDo not testTestFailureSuccessDo n

12、ot investInvestInvest611, 3$NPV0$NPVThe firm has two decisions to make:To test or not to test.To invest or not to invest.mNPV75.433, 3$0$NPVMcGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-8Stewart Pharmaceutical: Decision to Test Lets move back to the first s

13、tage, where the decision boils down to the simple question: should we invest? The expected payoff evaluated at date 1 is:failuregiven PayofffailureProb.successgiven PayoffsucessProb.payoffExpected 25.060, 2$0$40.75.433, 3$60.payoffExpected95.872$10. 125.060, 2$000, 1$NPV The NPV evaluated at date 0

14、is:So we should test.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-98.3 Sensitivity Analysis, Scenario Analysis, and Break-Even Analysis Allows us to look the behind the NPV number to see firm our estimates are. When working with spreadsheets, try to build

15、your model so that you can just adjust variables in one cell and have the NPV calculations key to that.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-10Sensitivity Analysis and Scenario AnalysisIn the Stewart Pharmaceutical example, revenues were projected t

16、o be $7,000,000 per year.If they are only $6,000,000 per year, the NPV falls to $1,341.64 Also known as “what if” analysis; we examine how sensitive a particular NPV calculation is to changes in the underlying assumptions.64.341, 1$)10. 1 (928$600, 1$41ttNPVInvestmentYear 1Years 2-5Revenues$6,000Var

17、iable Costs(3,000)Fixed Costs(1,800)Depreciation(400)Pretax profitTax (34%)Net ProfitCash Flow-$1,600McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-11Sensitivity Analysis%29.14000, 7$000, 7$000, 6$Rev% We can see that NPV is very sensitive to changes in reve

18、nues. For example, a 14% drop in revenue leads to a 61% drop in NPV%93.6075.433, 3$75.433, 3$64.341, 1$%NPVFor every 1% drop in revenue we can expect roughly a 4.25% drop in NPV%29.14%93.6025. 4McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-12Scenario Analys

19、isA variation on sensitivity analysis is scenario analysis.For example, the following three scenarios could apply to Stewart Pharmaceuticals:1.The next years each have heavy cold seasons, and sales exceed expectations, but labor costs skyrocket.2.The next years are normal and sales meet expectations

20、.3.The next years each have lighter than normal cold seasons, so sales fail to meet expectations.Other scenarios could apply to FDA approval for their drug.For each scenario, calculate the NPV.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-13Break-Even Analy

21、sis Another way to examine variability in our forecasts is break-even analysis. In the Stewart Pharmaceuticals example, we could be concerned with break-even revenue, break-even sales volume or break-even price. The break-even IATCF is given by:75.504$16987. 3600, 1$)10. 1 ($600, 1$041IATCFIATCFNPVt

22、tMcGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-14Break-Even Analysis We can start with the break-even incremental after-tax cash flow and work backwards through the income statement to back out break-even revenue:InvestmentcalculationCash Flow RevenuesVaria

23、ble CostsFixed CostsDepreciationPretax profitTax (34%)Net ProfitCash Flow$504.75InvestmentcalculationCash Flow RevenuesVariable CostsFixed CostsDepreciationPretax profitTax (34%)Net Profit= 504 - depreciation$104.75Cash Flow$504.75InvestmentcalculationCash Flow RevenuesVariable CostsFixed CostsDepre

24、ciationPretax profit= 104.75 (1-.34)$158.72Tax (34%)Net Profit= 504 - depreciation$104.75Cash Flow$504.75InvestmentcalculationCash Flow Revenues= 158.72+VC+FC+D$5,358.72Variable Costs(3,000)Fixed Costs(1,800)Depreciation(400)Pretax profit= 104.75 (1-.34)$158.72Tax (34%)Net Profit= 504 - depreciation

25、$104.75Cash Flow$504.75McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-15Break-Even Analysis Now that we have break-even revenue as $5,358.72 million we can calculate break-even price and sales volume. If the original plan was to generate revenues of $7,000 m

26、illion by selling the cold cure at $10 per dose and selling 700 million doses per year, we can reach break-even revenue with a sales volume of only:yearper million 87.535$10$72.358, 5$ volumesaleseven -Break volume)sales(price72.358, 5$We can reach break-even revenue with a price of only:doseper 65.

27、 7$dosesmillion 7million72.358, 5$priceeven -BreakMcGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-168.4 Options One of the fundamental insights of modern finance theory is that options have value. The phrase “We are out of options” is surely a sign of trouble

28、.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-17Options Because corporations make decisions in a dynamic environment, they have options that should be considered in project valuation. The Option to Expand Has value if demand turns out to be higher than exp

29、ected. The Option to Abandon Has value if demand turns out to be lower than expected. The Option to Delay Has value if the underlying variables are changing with a favorable trend.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-18The Option to Delay: Example

30、Consider the above project, which can be undertaken in any of the next 4 years. The discount rate is 10 percent. The present value of the benefits at the time the project is launched remain constant at $25,000, but since costs are declining the NPV at the time of launch steadily rises. The best time

31、 to launch the project is in year 2this schedule yields the highest NPV when judged today.YearCostPVNPV tNPV 0020,000$ 25,000$ 5,000$ 5,000$ 118,000$ 25,000$ 7,000$ 6,364$ 217,100$ 25,000$ 7,900$ 6,529$ 316,929$ 25,000$ 8,071$ 6,064$ 416,760$ 25,000$ 8,240$ 5,628$ 2)10. 1 (900, 7$529, 6$McGraw-Hill/

32、IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-19Discounted Cash Flows and Options We can calculate the market value of a project as the sum of the NPV of the project without options and the value of the managerial options implicit in the project.OptNPVMA good example w

33、ould be comparing the desirability of a specialized machine versus a more versatile machine. If they both cost about the same and last the same amount of time the more versatile machine is more valuable because it comes with options.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc.

34、All rights reserved.8-20The Option to Abandon: Example Suppose that we are drilling an oil well. The drilling rig costs $300 today and in one year the well is either a success or a failure. The outcomes are equally likely. The discount rate is 10%. The PV of the successful payoff at time one is $575

35、. The PV of the unsuccessful payoff at time one is $0.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-21The Option to Abandon: Example failuregiven PayofffailureProb.successgiven PayoffsucessProb.payoffExpected 5 .287$05 . 0575$5 . 0payoffExpected64.38$)10. 1

36、 (50.287$300$tNPVTraditional NPV analysis would indicate rejection of the project.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-22The Option to Abandon: ExampleThe firm has two decisions to make: drill or not, abandon or stay.Do not drillDrill0$NPV500$Failu

37、reSuccess: PV = $500Sell the rig; salvage value = $250 Sit on rig; stare at empty hole: PV = $0.Traditional NPV analysis overlooks the option to abandon.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.8-23The Option to Abandon: Example failuregiven PayofffailureProb.successgiven PayoffsucessProb.payoffExpected 50