Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Capital Asset Investment Strategy, Tactics & Tools Anthony F. Herbst JOHN WILEY & SONS, LTD Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Capital Asset Investment Strategy, Tactics & Tools Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Wiley Finance Series Asset Management: Equities Demystified Shanta Acharya An Introduction to Capital Markets: Products, Strategies, Participants Andrew M Chisholm Hedge Funds: Myths and Limits Francois-Serge Lhabitant The Manager’s Concise Guide to Risk Jihad S Nader Securities Operations: A guide to trade and position management Michael Simmons Modeling, Measuring and Hedging Operational Risk Marcelo Cruz Monte Carlo Methods in Finance Peter Jäckel Building and Using Dynamic Interest Rate Models Ken Kortanek and Vladimir Medvedev Structured Equity Derivatives: The Definitive Guide to Exotic Options and Structured Notes Harry Kat Advanced Modelling in Finance Using Excel and VBA Mary Jackson and Mike Staunton Operational Risk: Measurement and Modelling Jack King Advance Credit Risk Analysis: Financial Approaches and Mathematical Models to Assess, Price and Manage Credit Risk Didier Cossin and Hugues Pirotte Dictionary of Financial Engineering John F. Marshall Pricing Financial Derivatives: The Finite Difference Method Domingo A Tavella and Curt Randall Interest Rate Modelling Jessica James and Nick Webber Handbook of Hybrid Instruments: Convertible Bonds, Preferred Shares, Lyons, ELKS, DECS and Other Mandatory Convertible Notes Izzy Nelken (ed) Options on Foreign Exchange, Revised Edition David F DeRosa Volatility and Correlation in the Pricing of Equity, FX and Interest-Rate Options Riccardo Rebonato Risk Management and Analysis vol. 1: Measuring and Modelling Financial Risk Carol Alexander (ed) Risk Management and Analysis vol.
2: New Markets and Products Carol Alexander (ed) Interest-Rate Option Models: Understanding, Analysing and Using Models for Exotic Interest-Rate Options (second edition) Riccardo Rebonato Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Capital Asset Investment Strategy, Tactics & Tools Anthony F. Herbst JOHN WILEY & SONS, LTD Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Copyright C 2002 John Wiley & Sons Ltd, Baffins Lane, Chichester, West Sussex PO19 1UD, England Telephone (+44) 1243 779777 Email (for orders and customer service enquiries): cs-books@wiley.uk Visit our Home Page on www.uk or www.com All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London, W1P 0LP, UK, without the permission in writing of the Publisher. Requests to the Publisher should be addressed to the Permissions Department, John Wiley & Sons Ltd, Baffins Lane, Chichester, West Sussex PO19 1UD, England, or emailed to permreq@wiley.uk, or faxed to (+44) 1243 770571.
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Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Contents Preface xiii Acknowledgments xv 1 Introduction: the big picture, environment, terminology, and preview 1 Magnitude of capital investment 1 General perspective on capital investment 3 Capital budgeting 5 Cash flows 6 Cost of capital 6 Risk and uncertainty 7 Risk 7 Uncertainty 8 2 The Objective of capital budgeting 9 A normative model for capital budgeting 10 Basic valuation model 11 Operational adaptation 11 The cash flows 12 Cash flows and the public sector 12 3 Estimating basic project characteristics 13 Project types 13 Project characteristics 14 Initial cost 15 Sunk cost 15 Components of initial cost 16 Useful life 17 Physical deterioration 18 Technological obsolescence 19 Cash flows 19 Cash inflows (cash receipts) 21 Cash outflows 22 Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ vi Contents Taxes and depreciation 23 Depreciation 23 Straight-line depreciation 24 Double-declining-balance depreciation 24 Sum-of-the-years’ digits depreciation 24 Comparison of the basic depreciation methods 25 Example 3.3 26 ACRS Depreciation 27 Canadian depreciation 28 Investment tax credit 29 Inflation 30 4 Cost of capital 31 Introduction 31 Cost of capital components 31 Debt 31 Preferred stock 32 Common stock and retained earnings 33 Example 4.1 34 Overall cost of capital 34 Optimal capital structure 36 Interaction of financing and investment 38 Cautionary note 38 5 Traditional methods that ignore time-value of money 39 Payback and naive rate of return 39 Payback 39 The naive rate of return 41 Strong points of payback 41 Weak points of payback 41 Unrecovered investment 43 Accounting method: alias average return on average investment 43 Strong points of accounting method 43 Weak points of accounting method 44 Comprehensive example 44 6 Traditional methods that recognize time-value of money: the net present value 47 Unequal project size 51 The profitability index 51 Unequal project lives 51 Level annuities 53 Summary and conclusion 53 Strong points of NPV 53 Weak points of NPV 54 Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Contents vii 7 Traditional methods that recognize time-value of money: the internal rate of return 55 Definition of the IRR 55 A caution and a rule for IRR 58 Payback and IRR relationship 58 Mathematical logic for finding IRR 59 Interval bisection 60 Newton–Raphson method 61 Strong points of IRR 62 Weak points of IRR 62 A digression on nominal and effective rates 62 Investment–financing relationship 62 Nominal rate and effective rate 63 Clarification of nominal and effective rates 63 IRR with quarterly cash flows 64 8 Reinvestment rate assumptions for NPV and IRR and conflicting rankings 65 Reinvestment rate assumptions for NPV and IRR 65 Conflicting rankings and fisher’s intersection 68 Relationship of IRR and NPV 72 Adjusted, or modified, IRR 72 Summary and conclusion 73 9 The MAPI method 75 The concept of duality 75 The MAPI framework 77 Challenger and defender 77 Capital cost 77 Operating inferiority 78 Physical deterioration 79 Technological obsolescence 79 Two basic assumptions 79 Adverse minimum 80 First standard assumption 80 Second standard assumption 80 Application of the MAPI method 80 The problem of capacity disparities 82 Conclusion 83 10 The problem of mixed cash flows: I 85 Internal rate of return deficiencies 85 Example 10.1 85 Descartes’ rule 85 Example 10.2 86 The Teichroew, Robichek, AND Montalbano (TRM) analysis 87 Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ viii Contents The TRM algorithm 89 Example 10.5 92 The unique, real internal rate of return: caveat emptor! 94 A new theorem 96 Theorem 96 Proof 96 Corollary I 96 11 The problem of mixed cash flows: II 97 The Wiar method 97 Example 11. An application of the Wiar method 98 Sinking fund methods 99 The initial investment method 100 The traditional sinking fund method 100 Initial investment and traditional sinking fund methods 100 Example 11.5 104 The multiple investment sinking fund method 107 Strong points of the methods 108 Weak points of the methods 109 11A Appendix: the problem of mixed cash flows III — a two-stage method of analysis 110 Relationship to other methods 110 The two-stage method 111 Example 11A.2 114 Formal definition and relationship to NPV 114 Payback stage 115 “Borrowing” rate 116 Example 11A.3 116 Conclusion 117 A brief digression on uncertainty 117 12 Leasing 119 Alleged advantages to leasing 119 Analysis of leases 120 Traditional analysis 120 Example 12.1 121 Alternative analysis 122 Analysis 124 Implications 125 Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Contents ix Practical perspective 126 Summary and conclusion 127 Appendix 128 13 Leveraged leases 131 Definition and characteristics 131 Methods: leveraged lease analysis 132 Application of the methods 132 Example 13.2 133 Analysis of a typical leveraged lease (Childs and Gridley) 137 Example 13.3 137 Conclusion 139 14 Alternative investment measures 141 Additional rate of return measures 141 Geometric mean rate of return 141 Average discounted rate of return 142 Example 14.1 142 Time-related measures in investment analysis 144 Boulding’s time spread 145 Macaulay’s duration 146 Unrecovered investment 147 Summary and conclusion 148 15 Project abandonment analysis 149 The Robichek–Van Horne analysis 149 An alternate method: a parable 151 Comparison to R–VH 155 A dynamic programming approach 156 Summary and conclusion 158 16 Multiple project capital budgeting 159 Budget and other constraints 159 General linear programming approach 159 Mutual exclusivity 161 Contingent projects 161 Zero–one integer programming 162 Example 16.1 164 Goal programming 165 Summary and conclusion 169 16A Appendix to multiple project capital budgeting 170 17 Utility and risk aversion 177 The concept of utility 177 Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ x Contents Attitudes toward risk 178 Calculating personal utility 180 Whose utility? 184 Measures of risk 185 J. Mao’s survey results 187 Risk of ruin 188 Summary 189 18 Single project analysis under risk 191 The payback method 191 Certainty equivalents: method I 192 Example 18.1 192 Certainty equivalents: method II 193 Risk-adjusted discount rate 194 Example 18.2 195 Computer simulation 195 Example 18.3 196 Lewellen–Long criticism 200 19 Multiple project selection under risk: computer simulation and other approaches 203 Decision trees 203 Example 19.1 205 Other risk considerations 207 Example 19.2 A comprehensive simulation example 207 Conclusion 214 20 Multiple project selection under risk: portfolio approaches 215 Introduction 215 Example 20.1 215 Generalizations 216 Project independence 217 Project indivisibility 217 Multiple project selection 218 Finding the efficient set 220 The Sharpe modification 222 Relating to investor utility 223 Epilogue 223 21 The capital asset pricing model 225 Assumptions of the CAPM 225 The efficient set of portfolios 225 Portfolio choices 226 Enter a risk-free investment 226 The security market line and beta 228 The CAPM and valuation 230 The CAPM and cost of capital 231 Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Contents xi The CAPM and capital budgeting 232 Comparison with portfolio approaches 232 Some criticisms of the CAPM 233 The arbitrage pricing theory (APT) 234 Factors — what are they? 235 APT and CAPM 236 Development of the APT 237 22 Multiple project selection under risk 239 Example 22.1: Al’s Appliance Shop, revisited 240 Generalizations 241 Project independence — does it really exist? 242 Project indivisibility: a capital investment is not a security 243 Example 22.2: Noah Zark 244 Generalization on multiple project selection 246 Securities 247 Capital investments 247 Summary and conclusion 248 23 Real options 251 Acquiring and disposing: the call and put of it 251 More than one way to get there 252 Where are real options found? 252 Comparison to financial options 253 Flashback to PI ratio — a rose by another name. 253 Types of real options 254 Real option solution steps 255 Option phase diagrams 256 Complex projects 257 Estimating the underlying value 258 What to expect from real option analysis 258 Identifying real options — some examples 259 Contingent claim analysis 260 The binomial option pricing model 260 Example 23.