平狄克微观经济学investmenttimeandcapitalmarkets(编辑修改稿)

平狄克微观经济学investmenttimeandcapitalmarkets(编辑修改稿)内容摘要：

e Electric Motor Factory (choosing to build a $10 million factory) 8,000 motors/ month for 20 yrs  Cost = $ each  Price = $ Profit = $10/motor or $80,000/month  Factory life is 20 years with a scrap value of $1 million Should the pany invest? 169。 2020 Pearson Education, Inc. Chapter 15 42 The Net Present Value Criterion for Capital Investment Decisions Assume all information is certain (no risk) R = government bond rate Discount rates below , NPV is positive Discount rates above , NPV is negative %*)1(1)1(96.. . . )(1. 9 6)(1. 9 6 10 N P V20202RRRRR169。 2020 Pearson Education, Inc. Chapter 15 43 Net Present Value of a Factory Interest Rate, R 0 6 Net Present Value ($ millions) 4 2 0 2 4 6 8 10 •Firm should not invest for discount rates below •Firm should not invest for discount rates above R* = 169。 2020 Pearson Education, Inc. Chapter 15 44 The Net Present Value Criterion for Capital Investment Decisions When determining whether to invest or not, must distinguish between real and nominal rates Real versus Nominal Discount Rates Adjusting for the impact of inflation Assume price, cost, and profits are in real terms  Inflation = 5% 169。 2020 Pearson Education, Inc. Chapter 15 45 Real Versus Nominal Discount Rates Assume price, cost, and profits are in real terms Therefore,  P = ()() = , Year 2 P = ()() = … C = ()() = , Year 2, C =….  Profit remains $960,000/year 169。 2020 Pearson Education, Inc. Chapter 15 46 Real Versus Nominal Discount Rates If the cash flows are in real terms, then the discount rate must be in real terms as well Opportunity cost of the investment, so must include inflation here if doing it elsewhere Real R = nominal R inflation = 9% 5% = 4% 169。 2020 Pearson Education, Inc. Chapter 15 47 Net Present Value of a Factory Interest Rate, R 0 6 Net Present Value ($ millions) 4 2 0 2 4 6 8 10 ** If R = 4%, the NPV is positive. The pany should invest in the new factory. 169。 2020 Pearson Education, Inc. Chapter 15 48 The Net Present Value Criterion for Capital Investment Decisions Negative Future Cash Flows Companies expect losses in certain situations  Take time to build demand  High up front costs that lower over time Investment should be adjusted for construction time and losses 169。 2020 Pearson Education, Inc. Chapter 15 49 The Net Present Value Criterion for Capital Investment Decisions Electric Motor Factory Construction time is 1 year  $5 million expenditure today  $5 million expenditure next year Expected loss is $1 million the first year and $ million the second year Profit is $ million/yr. until year 20 Scrap value is $1 million 169。 2020 Pearson Education, Inc. Chapter 15 50 The Net Present Value Criterion for Capital Investment Decisions 20205432)1(1)1(96. . . .)1(96.)1(96. )(1.5)(11)(15 5 N P VRRRRRRR169。 2020 Pearson Education, Inc. Chapter 15 51 Adjustments for Risk Determining the discount rate for an uncertain environment: This can be done by increasing the discount rate by adding a riskpremium to the riskfree rate  Amount of money that a riskaverse individual will pay to avoid taking a risk 169。 2020 Pearson Education, Inc. Chapter 15 52 Diversifiable vs. Nondiversifiable Risk Diversifiable risk can be eliminated by investing in many projects or by holding the stocks of many panies Nondiversifiable risk cannot be eliminated and should be entered into the risk premium 169。 2020 Pearson Education, Inc. Chapter 15 53 Diversifiable vs. Nondiversifiable Risk Diversifying spreads risk over many options Invest in many types of investments – diversify portfolio Firms invest in many different projects No reward for assets that have only diversifiable risk – tend to earn return close to risk free return on average 169。 2020 Pearson Education, Inc. Chapter 15 54 Diversifiable vs. Nondiversifiable Risk Some risk cannot be eliminated or avoided Company profits depend on the economy – boom or recession Future economic growth is uncertain so cannot eliminate all risk  Investors should be rewarded for bearing this risk Opportunity cost of investing is higher – must include risk premium 169。 2020 Pearson Education, Inc. Chapter 15 55 Diversifiable vs. Nondiversifiable Risk The Capital Asset Pricing Model (CAPM) Model in which the risk premium for a capital investment depends on the correlation of the investment’s return with the return on the entire stock market If you invest in a mutual fund, there is no diversifiable risk but there is nondiversifiable risk since stocks tend to move with economy  Expected return on stock is higher than risk free investment 169。 2020 Pearson Education, Inc. Chapter 15 56 Capital Asset Pricing Model Suppose you invest in the entire stock market (mutual fund) rm = expected return of the stock market rf = risk free rate rm rf = risk premium for nondiversifiable risk Additional expected return you get for bearing the nondiversifiable risk of the stock market 169。 2020 Pearson Education, Inc. Chapter 15 57 Capital Asset Pricing Model Return on some assets is correlated with stock market as a whole CAPM summary of relationship between expected return and risk premium b e t a a s s e t a s s e t an on r e t u r n e x p e c t e d ifmfirrrrr )(169。 2020 Pearson Education, Inc. Chapter 15 58 Adjustments for Risk The asset beta, , measures the sensitivity of an asset’s return to ma。