MGM626-0801 8.P3PEconomics for Decision-Making

CTU OnlineSusan Leslie, Facilitator

February 8, 2008

OverviewNet present value (NPV)Financial appraisal of expansion

Calculating NPV of net cash flowsRelevanceAssumptionsRisks

Expansion recommendation

Net Present Value Compare value over timeAllows risk calculation

NPV ReportNet Present Value (U.S.$)

Risky cash flow = 22.82 milCertainly equivalent cash flow = 21.55 mil

Contrast

NPV Relevance: Decision-Making Tool

Determine future cash flowGo/no-goContrast with other projects

AssumptionsCertainty Equivalency Factor Sales figuresDiscount rate

RisksTrade policy changesWeakening U.S. economyPolitical direction

RecommendationPositive NPV looks promising for expansionU.S. economic and political risks demand

pause and recalculation of risk factors after the election

ReferencesRonPaul2008. (2008). On the issues. Retrieved February 8,

2008 from http://www.ronpaul2008.com/issues/

World Trade Organization. (2008). The Doha Declaration explained. Retrieved February 8, 2008 from http://www.wto.org/english/tratop_e/dda_e/dohaexplained_e.htm