Analytical Tools分析工具.pptVIP

Analytical Tools Marginal Discounted cash flow Benefit-cost Supply-demand Marginal Analysis Resources are limited, therefore we want the most “bang for our bucks” -- benefits from resources allocated to a project Marginal Analysis Economic efficiency Maximize “profit”, i.e. total revenue - total costs (TR - TC) Marginal Analysis Economic efficiency Profit maximized where marginal cost = marginal revenue (MC = MR) Marginal Analysis Financial Maturity of Tree Financial Maturity of Tree Compare return on investment with return from other 5-year investments If alternative is 10% ROI then don’t cut yet If alternative is 20%, cut at age 80 Why not compare with prevailing interest rate? Need to compute annual compound rate of interest Estimating Annual Compound Rate of Interest Use compounding multiplier, Vn = V0 (1+i)n, where, Vn = value n years in future V0 = value in year 0 (current time) n = number of years ahead i = annual compound rate of interest Solve Compounding Multiplier for i Vn = V0 (1+i)n Vn/ V0 = (1+i)n (Vn/ V0 )1/n = ((1+i)n)1/n = (1+i)n/n = 1+i (Vn/ V0 )1/n – 1 = i Analytical Tools Discounted cash flow Net present value Discount or compound all cash flows to same point in time Calculate using an assumed interest rate Internal rate of return Interest rate (i) that makes NPV zero, i.e. equates PV of all costs and all benefits “Calculate” the interest rate NPV and IRR Formula for NPV for a given interest rate ( i ) NPV Using Summation Notation Internal Rate of Return Using Summation Notation Soil Expectation Value (SEV) Financial criteria used to make even-aged timber management decisions. Simply the present value of a perpetual series of even-aged rotations Also known as Faustman formula Net Present Value (NPV) for a Single Rotation NPV will include the initial cost of land and land value at time n where, Nt = net cash flow in period t (Rt - Ct) Rt = revenue in year t Ct = expenditure year t n = number of years involved i = discount rate S