夏南新-中山大學嶺南學院說課講解

夏南新中山大學嶺南學院Preface

Thecontentofthecourseisconcernedwithcorp-orateinvestmentdecisionmaking,inparticulartheevaluationoflongtermcapitalexpendituredecisi-ons.Mostofthetheoreticalapproachescoveredarerelativelynonproblematical,suchasthetheor-eticalstrengthofnetpresentvalueasadecisioncriterion.IntroductionThenatureofinvestmentdecisionsAnoverviewThecoursecoversaparticularareaofmanagerialeconomics:thetheoryofinvestmentdecisionmakingbybusinesscorporations.Neverthelesssuchatheorycannotsucceedinitstaskifitisdevelopedinisolationfromwhatactuallydoeshappeninpractice,soweshouldguideandenrichthedevelopmentofournormativeapproach.ThevaluebaseTheinvestmentdecisiontheorydevelopedinthiscourseisfoundedonthevaluationbasesthatco-mefromcapitalismandtheideaofthefreemark-eteconomy.3.Theimpactofuncertaintyonthecapitalinvest-mentdecision—Chapters9and10.4.Investmentdecisionsinaninternationalcont-ext—Chapter11.Thedifficultiescausedbytaxation,inflationandcapitalscarcitywillallbetakenintoaccount,aswilltheconceptofriskandthefactthatthefu-tureisuncertain.AwarningAsafinalpoint,thelearnershouldbeconstantlyawarethatthetheoryofinvestmentdecisionswhichispresentedhereisneitherinastateofge-neraldetailedagreement,nordoesityetprovidecompletesolutionstomanyoftheimportantpr-oblemsoffinancialdecisionmaking.Inordertoreflectthisstateofaffairs,weshallexaminethecauseandevidenceofthesecontroversiesandpointouttheirrationalities,ambiguitiesandinco-nsistenciesthatnecessarilyaccompanythedevelopmentofanytheorythataspirestorealworldapplication.ThedecisionprocessWehavefirsttodiscusstodiscussthecircumsta-ncesinwhichadecisionneedsbemade.Wecanspecifytwonecessaryconditionsforadecisionsituation:1.Theexistenceofalternatives2.TheexistenceofanobjectiveorgoalTheexistenceofalternativesisnecessarybeca-use,iftherearenoalternativesfromwhichtochoose,thenthereisnoneedforadecision.Rationallyapersonwillbeunwillingtodosounlessheexpectsthatsomeoftheperceivedalternativeswillbepreferredtoothersinrelationtoattainingthedesiredobjective.ValuationofalternativesTogether,thesetwonecessaryconditionsprovidetherationaleformakingdecisions:ifthedecisionmakerdoesnotperceivealternatives,orseesnoreasontochoosebetweenthealternativesiftheyareperceived,thennodecisionwillbemade.Therefore,thevaluationmethodusedmustberelatedtotheobjectiveinvolvedinmakingthedecisionandthewayinwhichthatobjectiveisexpressed.Forexample,ifourobjectiveweretodrivefromAtoBintheshortestpossibletime,thenweshouldvaluethealternativeroutesfromAtoBbyacommonvaluecriterionwhichwasrelatedtoourobjectiveoftime,andchoosewhicheverroutetooktheshortesttime,Supposetherewerethreealternativeroutesandonewevaluedbytime,onebydistanceandonebyscenicbeauty.Weobviouslycouldnotmakeadecisionbecausethealternativeshavedifferentmeasuresoryard-sticksofvalueandsocannotbecompared.InvestmentdecisionmakingThecoursefocusesattentionononlytwoofthethreecomponents(i.e.,aseriesofperceivedalternatives,anexpectationthatthesealternativesarenotallequallydesirableintermsofattaininganobjectiveheldbythedecisionmaker,andacommonvaluebaserelatedtothedecisionobjective.)thatwehaveidentifiedinthedecisionprocessandexamineshowtheyrelatetothemakingofinvest-mentdecisions:theexpectationthattheperceivedalternativesarenotallequallydesirableintermsofattainingaspecificobjective,andthecommonvaluebasethatisrelatedtothisobjectiveandisusedtocomparethealternatives.Theapproachofthefundamentalvaluejudgementismostappropriateforlargelyunregulated,comp-etitiveeconomiesonthiscourse,i.e.,capitalism.Insucheconomies,itisreasonabletoassumethatcompaniesexistforoneoverridingpurpose:inordertobenefittheirowners.Thisrationaleforexistenceundoubtedlyholdstrueforthegreatmajorityofprivatelyownedcompanies(andalso,tosomeextent,forstate-ownedindustriesThedecisionobjectivealthoughtheirrationaleforexistencecanbemorecomplex).Therefore,management’sobjectiveinmakinginvestmentdecisionsshouldbetofurthertheveryreasonforthecompany’sexistence,ofbenefitingtheowners,i.e.,theshareholders.MaximizingshareholderwealthMorality,thelawandotherthingsmightactasconstraintsonwhatacompanydoesbuttheyareentirelydifferentissuesandaregenerallyasses-sedusingdifferentcriteria.Ordinarysharecapital,thesubstanceofowne-rship,isnormallyprovidedthroughsupplyanddemandmarkets(e.g.,stockexchanges),whichmeansthatpotentialshareholderscanbuysharesincompaniesthattheyexpectwillprovidethemwiththegreatestpossibleincreaseinwealth(i.e.,shareholdershavetomakefinancialdecisionsinmuchthesamewayasmanagement,choosingbetweenalternativeownershipopportunities),andexistingshareholderscanselltheirsharesiftheyseeothercompaniesprovidinggreaterincre-asestotheirowners’wealththantheyarereceiv-ing.Therefore,ifacompanyweretomakeitsdecisi-onsonbasesotherthanthatofmaximizingshare-holderwealth,thewholerationaleforthecompa-ny’sexistence–sofarasshareholdersareconcerned–wouldbeindoubtandtheywouldbelikelytotaketheirinvestmentfundselsewh-ere.DefiningwealthWealthcanbedefinedasthecapacitytoconsumeor,toputitinmorestraightforwardterms,money,cash,orotherassets.Thustheobjectiveofmanagementbecomesthemaximizationofshareholders’purchasingpower,whichcanbeachievedbymaximizingtheamountofcashpaidouttoshareholdersintheformofdividends.TheroleofaccountingprofitAccountinghasdevelopedoverhundredsofyearsfromabasscalledstewardship.Investmentdecisionsarebasicallyeconomicorresourceallocationdecisions.Mangementhavetodecidewhethertheyshouldallocatethefirm’sscarceresources(land,labour,machinery,etc.)toaparticularproject.Theeconomic‘unitofaccount’iscash,notaccountingprofit,becauseitiscashwhichgivespowertocommandresources(i.e.

resourcesarepurchasedwithcash,notprofit).Thecompany’sfinancialdecisionmakersshouldhaveastheirmajorconcernthemaximizationoftheflowofcashthroughtimetotheshareholders,buttheyshouldalwaysdosowithaneyetorepo-rtedprofit.ThetimedimensionAsasset(suchasamachineorashareinacompany)isvaluedonthebasisofthegains,orlosses,thattheownerreceives.Furthermore,thesegainsandlossesdonotrefertojustasingletimeperiod,buttothewholeperiodoffuturetimeforwhichtheassetwillexist.(Thisconceptissometimesreferredtoastheasset’searningpower.)Thegreaterthefuturedividendflow,themorehighlyarethesharesvalued.

TheobjectivehierarchyTosummarizetheassumedhierarchyofdecisionobjectives:1.Decisionsaretakenbycompaniessoastomaximizeowners’wealth.2.Owners’wealthcanbemaximizedthroughmaximizingowners’purchasingpower.3.Purchasingpowercanbemaximizedthroughmaximizingtheamountofcashthecompanypa-ysouttoshareholdersintheformofdividends.4.Withtheintrodu