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Table Of Contents

Measuring Returns Right: The Basic Principles
Steps in Investment Analysis
I. Estimating the Hurdle Rate for an Investment
Analyzing Project Risk: Three Examples
II. The Estimation Process
The Margins at Existing Store
Scenario Analysis: Boeing Super Jumbo
III. Measures of return: Accounting Earnings
From Forecasts to Accounting Earnings
Boeing Super Jumbo Jet: Investment Assumptions
Operating Assumptions
Other Assumptions
Operating Expenses & S,G & A: By Year
Depreciation and Amortization: By Year
Earnings on Project
And the Accounting View of Return
Would lead use to conclude that
From Project to Firm Return on Capital
6 Application Test: Assessing Investment Quality
IV. From Earnings to Cash Flows
The Depreciation Tax Benefit
Depreciation Methods
The Capital Expenditures Effect
To cap ex or not to cap ex
The Working Capital Effect
V. From Cash Flows to Incremental Cash Flows
Sunk Costs
Allocated Costs
Boeing: Super Jumbo Jet
The Incremental Cash Flows: Boeing Super Jumbo
VI. To Time-Weighted Cash Flows
Present Value Mechanics
Discounted cash flow measures of return
Closure on Cash Flows
Salvage Value on Boeing Super Jumbo
Which makes the argument that
The IRR of this project
The IRR suggests
Case 1: IRR versus NPV
What do we do now?
Case 2: NPV versus IRR
Which one would you pick?
Capital Rationing, Uncertainty and Choosing a Rule
An Alternative to IRR with Capital Rationing
Case 3: NPV versus IRR
Why the difference?
NPV, IRR and the Reinvestment Rate Assumption
Solution to Reinvestment Rate Problem
Why NPV and IRR may differ
Case: NPV and Project Life
Choosing Between Mutually Exclusive Projects
Solution 1: Project Replication
Solution 2: Equivalent Annuities
What would you choose as your investment tool?
What firms actually use
Boeing 747: What about exchange rate risk?
Should there be a risk premium for projects with substantial foreign exposure?
Equity Analysis: The Parallels
A New Store for the Home Depot
Interest and Principal Payments
Net Income on The Home Depot Store
The Hurdle Rate
ROE on this Project
From Project ROE to Firm ROE
Additional Assumptions
An Incremental CF Analysis
NPV of the Store
Internal Rate of Return: The Home Depot Store
The Role of Sensitivity Analysis
Viability of New Store: Sensitivity to Operating Margin
What does sensitivity analysis tell us?
The Home Depot: A New Store in Chile
The Home Depot Chile Store: Cashflows in Pesos
Converting Pesos to U.S. dollars
Analyzing the Project: U.S. Dollars
NPV in U.S. Dollars
Dealing with Inflation
From Nominal to Real : The Home Depot
Nominal versus Real
Side Costs and Benefits
Opportunity Cost
Case 1: Opportunity Costs
Case 2: Excess Capacity
Estimating the Cost of Excess Capacity
Opportunity Cost of Excess Capacity
Product and Project Cannibalization
Product and Project Cannibalization: A Real Cost?
Project Synergies
Other Investments
I. Investments in Non-Cash Working Capital
Distinguishing between Working Capital and Non-cash Working Capital
Why investments in non-cash working capital matter
The Effect of Non-cash working capital on a Project: Boeing Super Jumbo
Present Value Effect of Working Capital
NPV of Boeing Super Jumbo and Working Capital as % of Revenues
Firm Value and Working Capital Investments
Working Capital and Value: A Simple Example
Firm Value Schedule as a function of Working Capital
The Trade Off on Elements of Working Capital
Managing Inventory
Inventory Trade Off
A Simple Example
Inventory in an EOQ Model
Peer Group Analysis
Managing Accounts Receivable
Cash Flow Analysis: A Simple Example
NPV of Credit Decision
Investments In Marketable Securities
Investments in Riskless Securities
Investments in Risky Securities
Project Options
The Option to Delay
Valuing the Option to Delay a Project
Insights for Investment Analyses
The Option to Expand/Take Other Projects
The Option to Expand
An Example of an Expansion Option
Valuing the Expansion Option
Considering the Project with Expansion Option
The Option to Abandon
Valuing the Option to Abandon
Project with Option to Abandon
Should The Home Depot take this project?
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Measuring Investment Returns

Measuring Investment Returns

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Published by Patrícia Mika

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Published by: Patrícia Mika on May 09, 2012
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07/10/2013

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