agricultural microeconomics lesson 6: cost - benefit analysis
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Agricultural Microeconomics Lesson 6: Cost - Benefit Analysis. - PowerPoint PPT PresentationTRANSCRIPT
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Presentation Title
This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License
“Cattle at Sunset” by Andrew S. Gray Photography, Creative Commons CC BY-NC-SAhttp://www.andrewsgray.com/2012/07/cattle-at-sunset/
Agricultural MicroeconomicsLesson 6: Cost - Benefit Analysis
This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License
![Page 2: Agricultural Microeconomics Lesson 6: Cost - Benefit Analysis](https://reader035.vdocuments.mx/reader035/viewer/2022062520/5681607d550346895dcfa728/html5/thumbnails/2.jpg)
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Why Do a Cost-Benefit Analysis?
• Decide whether to undertake a project.
• Define project objectives.• Develop appropriate before and after
measures of project success.• Prepare estimates of the resources
required to perform the project work.
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Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Piedmont Farm
• 100 panel solar PV system• $75,000 estimated cost• Sale of electricity generated• Availability of federal grants and loan
guarantees to assist with financing.
![Page 4: Agricultural Microeconomics Lesson 6: Cost - Benefit Analysis](https://reader035.vdocuments.mx/reader035/viewer/2022062520/5681607d550346895dcfa728/html5/thumbnails/4.jpg)
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Calculating Benefits
How much electrical energy would a 100 panel solar PV system produce
each year?
100 panels x 0.25 kilowatts x 5 hours x 365 days
=45,625 kilowatt hours annually
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Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Calculating Benefits
How much estimated revenue will the Farm receive each year?
45,625 kilowatt-hour x $0.07 per kilowatt-hour
=$3,194
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Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Calculating Costs
Costs of loan repayment:– $37,500 REAP Guaranteed Loan– 4.0% interest rate– 30 year repayment term– $173 monthly ($2,148 annually)
Operating costs:– $250 each year
![Page 7: Agricultural Microeconomics Lesson 6: Cost - Benefit Analysis](https://reader035.vdocuments.mx/reader035/viewer/2022062520/5681607d550346895dcfa728/html5/thumbnails/7.jpg)
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Preparing Your Own Cost-Benefit Analysis
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Photos by: Nancy Ranney, Ranney Ranch. Used with permission
What are your results?YEAR PROJECT COST (CASH) REVENUE
LOAN REPAYMENT
OPERATING COSTS
NET BENEFIT (COST)
CUMMULATIVE NET BENEFIT
0 ($18,750) 0 0 0 ($18,750) ($18,750)1 0 $3,194 ($2,148) ($250) $795 ($17,955)2 0 $3,194 ($2,148) ($250) $795 ($17,159)3 0 $3,194 ($2,148) ($250) $795 ($16,364)4 0 $3,194 ($2,148) ($250) $795 ($15,568)5 0 $3,194 ($2,148) ($250) $795 ($14,773)6 0 $3,194 ($2,148) ($250) $795 ($13,978)7 0 $3,194 ($2,148) ($250) $795 ($13,182)8 0 $3,194 ($2,148) ($250) $795 ($12,387)9 0 $3,194 ($2,148) ($250) $795 ($11,592)
10 0 $3,194 ($2,148) ($250) $795 ($10,796)11 0 $3,194 ($2,148) ($250) $795 ($10,001)12 0 $3,194 ($2,148) ($250) $795 ($9,205)13 0 $3,194 ($2,148) ($250) $795 ($8,410)14 0 $3,194 ($2,148) ($250) $795 ($7,615)15 0 $3,194 ($2,148) ($250) $795 ($6,819)16 0 $3,194 ($2,148) ($250) $795 ($6,024)17 0 $3,194 ($2,148) ($250) $795 ($5,229)18 0 $3,194 ($2,148) ($250) $795 ($4,433)19 0 $3,194 ($2,148) ($250) $795 ($3,638)20 0 $3,194 ($2,148) ($250) $795 ($2,842)21 0 $3,194 ($2,148) ($250) $795 ($2,047)22 0 $3,194 ($2,148) ($250) $795 ($1,252)23 0 $3,194 ($2,148) ($250) $795 ($456)24 0 $3,194 ($2,148) ($250) $795 $33925 0 $3,194 ($2,148) ($250) $795 $1,13526 0 $3,194 ($2,148) ($250) $795 $1,93027 0 $3,194 ($2,148) ($250) $795 $2,72528 0 $3,194 ($2,148) ($250) $795 $3,52129 0 $3,194 ($2,148) ($250) $795 $4,31630 0 $3,194 ($2,148) ($250) $795 $5,111
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Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Discussion Questions
• Should Piedmont Farm invest in the solar panels? Why or Why Not?
• Are there any other costs that the farm owners might want to take into consideration?
• Are there other types of projects that the farm might consider instead of solar?
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Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Other Scenarios
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Presentation Title
This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License
“Cattle at Sunset” by Andrew S. Gray Photography, Creative Commons CC BY-NC-SAhttp://www.andrewsgray.com/2012/07/cattle-at-sunset/
Next Class: Intro to Spreadsheet Modeling
This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License