Annual Cash Flow Research Articles

Economics of Tea Leaf Production by the Small and Marginal Farmers in Assam

The study was carried out to examine the present status of tea cultivation and the economic feasibility of small growers in tea leaf production. Primary data pertaining to tea leaf production were collected from 60 small and marginal tea grower following simple random sampling without replacement technique by interviewing the farmers with the help of pre-tested structured schedules. The Financial Rate of Return from tea cultivation over Cost A1, Cost B and Cost C was estimated as 42.35 per cent, 34.38 per cent, and 31.66 per cent, respectively which is above the presumed opportunity cost of capital i.e. 10 percent per annum. The average annual constant net cash flows from tea plantation were98, 010, 82, 263 and74, 240 per hectare over Cost A1, Cost B and Cost C respectively. It was also observed that production of tea leaf was more profitable and employment generating in comparison to other selected crops in the study area. The benefit-cost ratio was estimated at 1.11 with a net present worth of Small Tea processing unit was estimated to be23.57 lakhs, considering 15 years of life time. The financial rate of return was arrived at 37.07 per cent which is above the presumed opportunity cost of capital. The annual constant flows of net return for the sample tea processing unit was found to be3.10 lakhs

Fish polyculture system integrated with vegetable farming improves yield and economic benefits of small-scale farmers

This study explored the yield and economic benefits of African sharptooth catfish, Clarias gariepinus, and Nile tilapia, Oreochromis niloticus polyculture, reared in earthen ponds for 270 days integrated with Chinese cabbage, Brassica rapa chinensis, farmed for 45 days to small-scale farmers in Tanzania. An integrated aquaculture–agriculture (IAA) system involving fishes and vegetables resulted in three and 2.5 times higher net yield than the culture of fishes alone and farming of non-integrated vegetables respectively. Vegetables irrigated with pond water resulted in 1.8 times higher net and annual yields than those irrigated with stream water. The practice of fish–vegetable integration and growing of vegetables irrigated with pond water produced 14 and 13 times higher net annual yield, respectively, than the culture of fishes alone. The integrated system produced 20 and 150 times more net returns compared with vegetables irrigated with pond and stream water respectively. Integrating fishes with vegetables resulted in significantly higher annual net cash flow than the farming of fishes and vegetables separately. The study revealed that integrating fishes with B. rapa chinensis increases yields, income and food production to small-scale farmers. Thus, small-scale farmers can adopt IAA technology to meet the increasing demand of fish and vegetables, stabilize their incomes and diversify food production, consequently improving food security. These benefits will be realized by providing proper training in IAA technology and management skills to small-scale farmers.

Investment appraisal of automatic milking and conventional milking technologies in a pasture-based dairy system

The successful integration of automatic milking (AM) systems and grazing has resulted in AM becoming a feasible alternative to conventional milking (CM) in pasture-based systems. The objective of this study was to identify the profitability of AM in a pasture-based system, relative to CM herringbone parlors with 2 different levels of automation, across 2 farm sizes, over a 10-yr period following initial investment. The scenarios which were evaluated were (1) a medium farm milking 70 cows twice daily, with 1 AM unit, a 12-unit CM medium-specification (MS) parlor and a 12-unit CM high-specification (HS) parlor, and (2) a large farm milking 140 cows twice daily with 2 AM units, a 20-unit CM MS parlor and a 20-unit CM HS parlor. A stochastic whole-farm budgetary simulation model combined capital investment costs and annual labor and maintenance costs for each investment scenario, with each scenario evaluated using multiple financial metrics, such as annual net profit, annual net cash flow, total discounted net profitability, total discounted net cash flow, and return on investment. The capital required for each investment was financed from borrowings at an interest rate of 5% and repaid over 10-yr, whereas milking equipment and building infrastructure were depreciated over 10 and 20 yr, respectively. A supporting labor audit (conducted on both AM and CM farms) showed a 36% reduction in labor demand associated with AM. However, despite this reduction in labor, MS CM technologies consistently achieved greater profitability, irrespective of farm size. The AM system achieved intermediate profitability at medium farm size; it was 0.5% less profitable than HS technology at the large farm size. The difference in profitability was greatest in the years after the initial investment. This study indicated that although milking with AM was less profitable than MS technologies, it was competitive when compared with a CM parlor of similar technology.

Investments for New Product Development: A Break-Even Time Analysis

Combining the product-process matrix and cost-volume-profit analysis, we identify a pattern of annual cash flows for new product development (NPD) and name it the New Product Investment Curve (NPIC). A sample of 411 firms provides confirming evidence for the NPIC. On average, firms needed 12 years to recover their initial and subsequent investments for NPD. The break-even time, however, exhibits significant differences across industries depending on the speed of innovation and the cost structure of each industry. Engineering managers in an industry with high R&D and high fixed costs need to prepare for longer break-even times than those in other industries. This article provides implications for the value of cooperation between engineering managers and financial managers in NPD.

Expanding the dairy herd in pasture-based systems: The role of sexed semen within alternative breeding strategies

A simulation model was developed to determine the effects of sexed semen use in heifers and lactating cows on replacement heifer numbers and rate of herd expansion in a seasonal dairy production system. Five separate artificial insemination (AI) protocols were established according to the type of semen used: (1) conventional frozen-thawed semen (CONV); (2) sexed semen in heifers and conventional semen used in cows (SS-HEIFER); (3) sexed semen in heifers and a targeted group of cows (body condition score ≥3 and calved ≥63 d), with conventional semen used in the remainder of cows (SS-CONV); (4) sexed semen in heifers and a targeted group of cows, with conventional semen in the remainder of cows for the first AI and conventional beef semen used for the second AI (SS-BEEF); or (5) sexed semen in heifers and a targeted group of cows, with conventional semen in the remainder of cows for the first AI and short gestation length semen used for the second AI (SS-SGL). Each AI protocol was assessed under 3 scenarios of sexed semen conception rate (SS-CR): 100, 94, and 87% relative to that of conventional semen. Artificial insemination was used on heifers for the first 3 wk and on cows for the first 6 wk of the 12-wk breeding season. The initial herd size was 100 cows, and all available replacement heifers were retained to facilitate herd expansion, up to a maximum herd size of 300 cows. Once maximum herd size was reached, all excess heifer calves were sold at 1 mo old. All capital expenditure associated with expansion was financed with a 15-yr loan. Each AI protocol was evaluated in terms of annual farm profit, annual cash flow, and total discounted net profit. The SS-CONV protocol generated more replacement heifers than all other AI protocols, facilitating faster expansion, and reached maximum herd size in yr 9, 9, and 10 for 100, 94, and 87% SS-CR, respectively. All AI protocols, except SS-BEEF and SS-SGL at 87% SS-CR, reached maximum herd size within the 15-yr period. Negative profit margins were experienced for SS-CONV in the first 5, 4, and 3 yr of expansion for 100, 94, and 87% SS-CR, respectively. Total discounted net profit was greater in all sexed semen AI protocols compared with CONV. This study demonstrated that, for each SS-CR, the greatest rate of expansion is achieved when using sexed and conventional semen (SS-CONV). The combined use of sexed semen and beef (SS-BEEF) or SGL (SS-SGL) semen resulted in greater discounted net profit at 100, 94, and 87% SS-CR compared with CONV, but a similar net worth change at 87% SS-CR due to a lower inventory change because SS-BEEF and SS-SGL reached maximum herd size within 15 yr.

Changes in the I/B/E/S Database and Their Effect on the Observed Properties of Analyst Forecasts

I/B/E/S is a common source of analyst forecast data, and the consistency of the data is important for both practice and academic research. We document substantial changes in the historical contents of I/B/E/S over time. We compare two versions of the I/B/E/S EPS detail file: one available in 2009 and the other available in 2015. Examining a common sample period (1993 through 2007), we find that 12 percent of the observations in the earlier version of I/B/E/S are omitted from the later version, whereas 6 percent are added to the later version as new observations that did not exist in the earlier version, and 9 percent of the observations in both versions report different forecasts of earnings. These discrepancies are systematically associated with various firm and analyst characteristics. We find that earnings forecasts in the later version are significantly more accurate, less biased, and bolder than the forecasts in the earlier version. We also find substantial differences in the firms identified as meeting or just beating analysts’ expectations of earnings. Finally, these discrepancies are less pronounced when comparing separate versions of the EPS summary file, but are more pronounced when examining individual analyst quarterly forecasts and annual cash flow forecasts.

Economic evaluation of using surge valves in furrow irrigation of row crops in Louisiana: A net present value approach

Addressing irrigation water efficiency continues to emerge as one of the potential solutions to minimize irrigation water use, improve water quality, and enhance soil health. Despite the clear importance of financial information in decision‐making regarding adoption of irrigation tools, little information is available regarding the profitability outlook of such adoption. Lack of assessment of costs and returns could lead to producers resisting adoption citing profit reductions. Hence, a cost-assessment using the financial information is necessary to evaluate the tools’ economic outlook. By using long-term projections of input prices, crop yield, and crop prices, this paper develops a financial analysis of irrigation using surge valves by calculating annual cash flows and net present value. The analysis is based on demonstration plot results and anecdotal estimates related to water savings and yield improvements in corn and soybeans in Louisiana and Mississippi. The positive estimates for net present value indicate that an investment in irrigation efficiency improvement is an economically sound choice. These estimates can enhance the adoption of irrigation‐efficiency improvement practices by providing an initial understanding of the overall profitability independent of short-term management decisions.

Costs and Risk of Catfish Split‐pond Systems

AbstractSplit ponds are recently developed pond‐based aquaculture systems that allow intensification of catfish aquaculture. Successful industry‐wide adoption of newly developing technologies like split‐pond systems will depend upon their productivity and cost efficiencies. Costs and production performance of the following three split‐pond design scenarios were monitored in Arkansas and Mississippi: (1) research design developed at the Thad Cochran National Warmwater Aquaculture Center, Stoneville, Mississippi; (2) waterwheel design tested on commercial catfish ponds; and (3) screw‐pump design tested on commercial catfish ponds. An economic engineering approach using standard enterprise budget analysis was used to develop estimates of breakeven prices (BEPs) ($/kg) for producing foodsize hybrid catfish (♂Ictalurus furcatus × ♀Ictalurus punctatus) for each scenario. Estimates of BEPs of hybrid catfish raised in split ponds ranged from $1.72 to $2.05/kg. The cost of catfish production in split ponds was sensitive to yield, fish prices, and feed prices. Annual net cash flows from both commercial split‐pond systems were high and sufficient to make the investment profitable in the long run. Feed price, feed conversion ratio, and yield contributed the most to downside risk of split ponds.

Evaluation Models for Decision Support in the Context of Organic Farming System

Abstract This paper presents the application of the combination of simulation model and multi-criteria decision models for evaluating investment in agricultural processing. The simulated alternatives are evaluated with multi-attribute decision tools expert system. The simulation system consists of deterministic production simulation models that enable different types of costs calculations for organic production and on farm food processing in the framework of supplementary activities. Simulation models were further evaluate by a qualitative multi-attribute decision modelling methodology using the software tool DEX-I and quantitative analytical hierarchical process (AHP). The simulation model was also evaluated by the standard financial analysis (i.e., cost benefit analysis). These results show that there was the difference before and after investment into specific processing equipment of three organic products with respect to positive financial values. The financial analysis reveals that after 10 years the farm had constant annual cash flow with an investment return at 9.43%. This showed that investments into organic farm was feasible financially. The integrated simulation model as the discount cash flow and multi-criteria decision analysis are the suitable methodological tool fordecision support system on organic farms. The system takes into consideration different independent criteria and enables ranking of farm business alternatives. The model is useful in minimizing risk and inappropriate decision in investment.

Profitability of food trees planted in urban public green areas

Planting food trees within local parks and other public urban green areas is starting to gain in popularity as a strategy to enhance the sustainable development of cities. However, the financial opportunity that it could represent has barely been studied. This paper investigates the financial potential of the establishment of food trees in urban public green areas of Villa El Salvador, Peru, with the help of local inhabitants. Net present value (NPV), benefit-cost Ratio (BCR), and equivalent annual cash flow (EACF) were calculated to evaluate the financial performance of two designs of productive tree systems drawn to scale for two local public parks. Results provide evidence that the involvement of a small group of local producers in the maintenance and care of public green areas could be translated, for a municipality, into financial benefits. For the producers, the possibility to harvest edible products also led to financial benefits, but only if the time invested in the productive activities was not taken into account. Thus, the use of food trees in green public areas appears to be a financially valuable alternative for both a municipality and its local inhabitants.

A graphical criterion for working fluid selection and thermodynamic system comparison in waste heat recovery

In the present study, we proposed a graphical criterion called CE diagram by achieving the Pareto optimal solutions of the annual cash flow and exergy efficiency. This new graphical criterion enables both working fluid selection and thermodynamic system comparison for waste heat recovery. It's better than the existing criterion based on single objective optimization because it is graphical and intuitionistic in the form of diagram. The features of CE diagram were illustrated by studying 5 examples with different heat-source temperatures (ranging between 100 °C to 260 °C), 26 chlorine-free working fluids and two typical ORC systems including basic organic Rankine cycle(BORC) and recuperative organic Rankine cycle (RORC). It is found that the proposed graphical criterion is feasible and can be applied to any closed loop waste heat recovery thermodynamic systems and working fluids.

Economic feasibility of sugar and ethanol production in Brazil under alternative future prices outlook

Brazil has a key role in the global market for sugar and ethanol, but its future role depends on the industry's financial viability, which has been affected by low and variable prices, credit shortages, and policies that affect price of substitutes like gasoline. Our objective was to assess the financial viability of Brazil's sugar and ethanol industries under alternative future price outlooks for the 10-year period through 2022. A Monte Carlo simulation model was developed in order to evaluate the economic performance of a representative sugar mill in São Paulo State, Brazil. The economic feasibility study was conducted using four different price scenarios forecasted by FAPRI-ISU, OECD-FAO, USDA and World Bank. The model starts each year with a stochastic annual sugarcane yield and area harvested. Monthly production is simulated for white sugar, very high polarization (VHP) sugar, anhydrous and hydrated ethanol based on stochastic monthly sugar cane production. In the next section, the cost section, total costs are simulated for cane production and processing into products, and are used with simulated revenues to calculate net cash income, annual cash flows, balance sheet components and profitability measured in terms of net present value (NPV) and rate of return on equity (ROE). The results showed a high probability of success for a sugar mill if the OECD-FAO, USDA and World Bank price forecasts were to prevail. Under these price forecasts the NPV and ROE show a zero probability of values less than zero. The FAPRI price scenario presented a small probability of negatives values for NPV and ROE, and indicated the largest relative risk for these two variables. These results help to better understand the outlook for the Brazilian sugar and ethanol industry over the next 10years. The Brazilian sugar and ethanol industry will continue to experience a high degree of risk and uncertainty from production, macroeconomic variables, demand, costs of production and market price. As a result, the industry will likely see considerable risk in rates of return, net cash income, and ending cash; however, there is a high probability that the industry will be profitable.

Determining the Optimum Cut-Off Grades in Sulfide Copper Deposits / Określanie Optymalnej Wartości Odcięcia Zawartości Procentowej Pierwiastka Użytecznego W Złożach Siarczku Miedzi

Abstract Optimum cut-off grades determination in mining life affects production planning and ultimate pit limit and it is also important from social, economical and environmental aspects. Calculation of optimum cut-off grades has been less considered for mines containing various mineral processing methods. In this paper, an optimization technique is applied to obtain optimum cut-off grades for both concentration and heap leaching processes. In this technique, production costs and different recoveries of heap leaching method directed into modeling different annual cash flows in copper mines. Considering the governing constraints, the Lagrange multiplier method is practiced to optimize the cut-off grades in which the objective function is supposed to maximize Net Present Value. The results indicate the effect of heap leaching process on the optimum cut-off grades of primary and secondary sulfide deposits.

Optimal control of natural resources in mining industry

The paper focuses on the optimal control of natural resources in mining industry. The purpose is to propose an optimal extraction series of these resources during the lifetime of the Mine’s maintenance. Following the proposed optimal control model, a sensitivity analysis has been performed that includes the interest rate impact on the optimal solution. This study shows that the increasing of the interest rate stimulates faster extraction of the resources. The discounting factor induces that the resource has to be extracted faster but this effect is counterbalanced by the diminishing returns of the annual cash flow. At higher parameters of “alpha” close to one of the power function about 80% from the whole resource will be extracted during the first 4years of object/mine maintenance. An existence of unique positive root with respect to return of investment has been proposed and proved by two ways: by the “method of chords” and by using specialized software.

Uncertain programming models for capital budgeting subject to experts' estimations

This paper discusses capital budgeting problem in uncertain environment, in which investment outlays and annual net cash flows of available projects are given subject to experts' estimations. Net present value (NPV) is extended to uncertain environment. As a result, three mathematical models are constructed for the problem, i.e., expected value model, chance-constrained programming model and chance-measure programming model. After that, some crisp equivalences are also discussed for different models. In addition, a hybrid intelligent algorithm for solving the proposed models in general cases is presented. To illustrate the modeling idea and the effectiveness of the proposed algorithm, some numerical examples are provided.

Selecting sewage sludge treatment alternatives in modern wastewater treatment plants using environmental decision support systems

The importance of the sewage sludge treatment within the field of wastewater treatment plants (WWTPs) suggests new dimensions of analysis where the relevance of economic criteria combined with the associated environmental issues are increasing the sludge management complexity. For supporting the decision process and for comparative purposes, this study assesses five alternative configurations for sludge treatment, namely: mesophilic and termophilic anaerobic digestion plus composting, incineration, gasification, and supercritical water oxidation (SCWO). The global warming potential (GWP) and the annual cash flow of each alternative are used to estimate a composite indicator for each alternative. Stakeholders' preferences are integrated into the assessment through the development of five scenarios prioritizing economic or environmental aspects. A case study for a 1 million person equivalent WWTP proved that SCWO is the most adequate option if economic and environmental criteria are considered equally important. However, if the economic assessment is prioritized over the environmental one, thermophilic anaerobic digestion followed by composting turned out to be the most appropriate option. The proposed approach contributes to the implementation of more suitable sewage sludge treatment lines since it provides an indicator for each alternative embracing economic and GWP issues.

An ex ante analysis on the use of activity meters for automated estrus detection: To invest or not to invest?

The technical performance of activity meters for automated detection of estrus in dairy farming has been studied, and such meters are already used in practice. However, information on the economic consequences of using activity meters is lacking. The current study analyzes the economic benefits of a sensor system for detection of estrus and appraises the feasibility of an investment in such a system. A stochastic dynamic simulation model was used to simulate reproductive performance of a dairy herd. The number of cow places in this herd was fixed at 130. The model started with 130 randomly drawn cows (in a Monte Carlo process) and simulated calvings and replacement of these cows in subsequent years. Default herd characteristics were a conception rate of 50%, an 8-wk dry-off period, and an average milk production level of 8,310kg per cow per 305 d. Model inputs were derived from real farm data and expertise. For the analysis, visual detection by the farmer (“without” situation) was compared with automated detection with activity meters (“with” situation). For visual estrus detection, an estrus detection rate of 50% and a specificity of 100% were assumed. For automated estrus detection, an estrus detection rate of 80% and a specificity of 95% were assumed. The results of the cow simulation model were used to estimate the difference between the annual net cash flows in the “with” and “without” situations (marginal financial effect) and the internal rate of return (IRR) as profitability indicators. The use of activity meters led to improved estrus detection and, therefore, to a decrease in the average calving interval and subsequent increase in annual milk production. For visual estrus detection, the average calving interval was 419 d and average annual milk production was 1,032,278kg. For activity meters, the average calving interval was 403 d and the average annual milk production was 1,043,398kg. It was estimated that the initial investment in activity meters would cost €17,728 for a herd of 130 cows, with an additional cost of €90 per year for the replacement of malfunctioning activity meters. Changes in annual net cash flows arising from using an activity meter included extra revenues from increased milk production and number of calves sold, increased costs from more inseminations, calvings, and feed consumption, and reduced costs from fewer culled cows and less labor for estrus detection. These changes in cash flows were caused mainly by changes in the technical results of the simulated dairy herds, which arose from differences in the estrus detection rate and specificity between the “with” and “without” situations. The average marginal financial effect in the “with” and “without” situations was €2,827 for the baseline scenario, with an average IRR of 11%. The IRR is a measure of the return on invested capital. Investment in activity meters was generally profitable. The most influential assumptions on the profitability of this investment were the assumed culling rules and the increase in sensitivity of estrus detection between the “without” and the “with” situation.

Potential cost to Western Australia of proposed patient co-payments according to healthcare organisational structure: A preliminary analysis

The Australian federal government has proposed an AUD $7 patient co-payment for a general practitioner (GP) consultation. One effect of the co-payment may be that patients will seek assistance at public hospital emergency departments (EDs), where currently there is no user charge. We studied the possible financial impact of patient diversion on the Western Australia (WA) health budget. We constructed a spreadsheet model of changes in annual cash flows including the co-payment, GP fees for service, and rates of diversion to emergency departments with additional marginal costs for ED attendance. Changes in WA cash flows are the aggregate of marginal ED costs of treating diverted patients and added expenditure in fees paid to rural doctors who also man local emergency centres. The estimated costs to WA are AUD $6.3 million, $35.9 million and $87.4 million at 1, 5, and 10 per cent diversion, respectively. Commonwealth receipts increase and expenditure on Medicare benefits declines. A diversion of patients from GP surgeries to ED in WA caused by the co-payment will result in increased costs to the state, which may be substantial, and will reduce net costs to the Commonwealth.

Saving assessment using the PERS in solar power towers

The improvement of the solar power tower using solar salt is one of the main goals of researchers. Any method or invention to improve the efficiency of this technology contributes to promote the renewable energies. The use of a Potential Energy Recovery System (PERS) in two different solar power tower plants of 20 and 100MW has been analysed.The PERS is formed, at least, by one turbine, located at the hot salt pipe coming from the receiver. The turbine is engaged to the shaft of the feed pump, which raises the heat transfer fluid from the cold tank to the receiver. It reduces the parasitic power consumption of the plant, and increases its global efficiency.Different PERS configurations have been modelled. Based on an energetic and economic analysis, the optimal configuration is a geometrical similar turbine of three times the volume flow rate of one feed pump. The PERS has been proven to be a cost reductive and clean tool. For a 100MW power plant of 30-year lifetime the investment cost is 1.26M$ and the annual cash flow is 0.89M$, while for a plant of 20MW these values are 0.26M$ and 0.19M$, respectively.

Stochastic financial analytics for cash flow forecasting

Accurate cash flow forecasting is essential for successful management of firms and it becomes especially critical during uncertain market and credit conditions. Without accurate cash flow forecasting, a firm may fail to meet its short-term obligations and risk bankruptcy. Accurate cash flow forecasting can be limited by a number of factors including changes in macro-economic conditions that influence liquidity in the economy, customer payment behavior that can vary from time to time as well by industry, and dynamics of the particular supply chain itself. We develop stochastic financial analytics for cash flow forecasting for firms by integrating two models: (1) Markov chain model of the aggregate payment behavior across all customers of the firm using accounts receivable aging and; (2) Bayesian model of individual customer payment behavior at the individual invoice level. As the stochastic dynamics of cash flow evolves every day, the forecast can be updated every time an invoice is paid. The proposed model is back-tested using empirical data from a small manufacturing firm and found to differ 3–6% from actual monthly cash flow, and differs approximately 2–4% compared to actual annual cash flow. The forecast accuracy of the proposed stochastic financial analytics model is found to be considerably superior to other techniques commonly used. Furthermore, in computer simulation experiments, the proposed model is found to be largely robust to supply chain dynamics, including when subjected to severe bullwhip effect. The proposed model has been implemented in Excel, which allows it to be easily integrated with the accounts receivable aging data, making it practicable for small and large firms.