Social Opportunity Cost Of Capital Research Articles

Analysis of Financial Feasibility System Integration of Cow and Palm Oil with A Semi Intensive Maintenance System (Case Study on Sarwo Sari Farmer Group at Sari Makmur Village Pangkalan Lesung District Pelalawan Regency)

This research aims to analyze the financial feasibility and sensitivity to changes in input prices, production levels and prices of the output of a business System integration of Cow-Palm oil in Sari Makmur villagePangkalan Lesung District Pelalawan Regency Province of Riau. The research method used is the method of case studies. Data used are primary data and secondary data. The informant on this research consists of a group of farmers which is Sari Sarwo group members as many as 14 people and the number of cattle beginning as many as 51 cows , extension officers of Sari Makmur village, Village Unit Cooperative of Sari Makmur,and Village Unit Cooperative shop of Sari Makmur. Data analysis the criteria used was Net Present Value (NPV), Net Benefit Cost Ratio (Net B/C) and Internal Rate of Return (IRR). The results showed : integration efforts of cow-palm oil is worth because it has a value of NPV is positive, the value of Net B/C is greater than zero and the value of the IRR is greater than the Social Opportunity Cost of Capital (SOCC), the business is still eligible for develop in the event of a decrease in the price increase of chemical fertilizer 32.80%, decrease in price of palm oil of 15%, and decrease in urine and feses price 50%.The business is un eligible to developif in the production of palm oil greater than47,21%, and decrease in birth rate cow greater than53,68%.

Public Sector Discount Rates: A Comparison of Alternative Approaches

AbstractThis article describes alternative approaches to the public sector discount rate and explains the assumptions involved. Time‐varying rates are also considered. The social opportunity cost of capital (SOC) is the rate of return that could be earned on the ‘next best alternative’. The social rate of time preference (SRTP) is the rate of return required in order to divert resources to a public investment. Only in an ‘ideal’ market are these two rates brought into alignment in equilibrium. Essentially the discount rate reflects how the government values the future when making decisions on behalf of society: value judgements are unavoidable.

The Social Rate of Time Preference and the Social Discount Rate

This paper explains the conceptual basis for the social rate of time preference (STP) and why it is the appropriate method of choosing the social discount rate (SDR), compared to the most prominent alternative method: the social opportunity cost of capital (SOC). We recommend that for intragenerational projects in the United States, a rate of 3.5 percent is appropriate. For long-term intergenerational effects, we recommend using declining rates. Obtaining the SDR is intrinsically a normative exercise in a second-best world. Policymakers should maximize a social welfare function that equals the present value of current and future utility from per capita consumption. In the presence of economic growth, there will be greater future consumption possibilities. Given the assumption of diminishing marginal utility of income, the consumption of a wealthier, future society should be discounted. Displaced private investment should be accounted for by first multiplying by the shadow price of capital, but this will not generally be necessary as most government interventions mainly affect consumption. Systematic risk should be handled by conversion of expected net benefits into certainty equivalents before discounting at the risk-free SDR, but empirically this effect is typically too small to matter. Among governments there is increased adoption of both the STP method and the use of time-declining rates. Even governments using other approaches are lowering their rates, and most OECD countries now apply rates in the 3 to 5.5 percent range.

A Review of Approaches to Construct Social Discount Rate

There is increasing concern on how public projects are being evaluated especially for public projects that bring impacts towards the economic, social and environmental of the nation in the long-term, for example infrastructural, environmental protection, energy efficiency, healthcare, education expenditures and others. Thus, the federal government and state government recommend project assessors to adopt cost-benefit analysis for major infrastructure and social investment as well as for regulatory initiatives. Cost benefit analysis has been widely used as a tool to enable stakeholders to make a better decision for projects by systematically comparing the social costs and benefits with the emphasis on valuing them in monetary term. One of the most significant parameters for cost benefit analysis is the social discount rate. It is a rate that used to convert the future social costs and benefits into present value. However, there is a long-time debate on how to construct appropriate social discount rate. Literature reveals that there are various popular approaches to construct social discount rate, such as Social Time Preference (STP) approach, Social Opportunity Cost of Capital (SOC), and Shadow Price of Capital (SPC). The selection of approaches is a significant process to construct an appropriate social discount rate for the project. In this paper, author examines theoretical for each approach and procedures to construct social discount rate. A framework will be developed to guide the assessor in selecting the approaches to construct social discount rate. This paper intends to review social discount rate construction approaches and the pros and cons of each approach. The paper would provide insight to assessor in selecting the approach in construction social discount rate.

Analisis Finansial Usaha Pembesaran Ikan Nila dalam Keramba “H. Jam’an” Di Desa Sungai Hanyar Kecamatan Banua Lawas Kabupaten Tabalong

This study aims to (i) find out the magnitude of the Net Present Value (NPV) and Internal Rate of Return (IRR) efforts to enlarge tilapia in cages in Sungai Hanyar Village (ii) to know the Pay Back Prize to restore business capital enlargement of tilapia in cages (iv) knowing the break-even point (Break Event Point) in an effort to enlarge tilapia in cages. The method used is descriptive method. The research design is case study design and field research. Analysis of the data used is financial and to make a feasibility study is financial analysis and to make a case study of field research. Data analysis using NPV, IRR <, and PBP. The total cost of maintaining tilapia is Rp. 55,210,012, - per year, while income is Rp. 153,250,000 per year and income in the tilapia fish maintenance business Rp. 101,836,000 million, - per year. In the maintenance business of tilapia H. Jam'an in Sungai Hanyar Banua Lawas Tabalong Regency based on an analysis of the investment feasibility of Net Net Value Value (NPV) of Rp. 220,353,136 is known, - The results of the study show NPV> 0, meaning that the effort to enlarge H.jam'an indigo is feasible / continued. Based on the Retrun calculation method internally produces 87% and the social opportunity cost of capital (SOCC) of 18% means IRR> SOCC, thus the business of enlarging H.Jam'an tilapia in Sungai Hanyar Village, Banua Lawas District, Tabalong Regency is feasible to be cultivated / next. The results of the feasibility analysis based on the payback period investment (PBP) in the maintenance business of H. Jam'an tilapia in Sungai Hanyar Banua Lawas, District of Tabalong 1 year 11 months 28 days have received a return on investment.

More appropriate discounting: the rate of social time preference and the value of the social discount rate

Recently, a number of authors, including Burgess and Zerbe, have recommended the use of a real social discount rate (SDR) in the range of 6–8% in benefit-cost analysis (BCA) of public projects. They derive this rate based on the social opportunity cost of capital (SOC) method. In contrast, this article argues that the correct method is to discount future impacts based on the rate of social time preference (STP). Flows in or out of private investment should be multiplied by the shadow price of capital (SPC). Using this method and employing recent United States data, we obtain an estimate of the rate of STP of 3.5% and an SPC of 2.2. We also re-estimate the SDR using the SOC method and conclude that, even if analysts continue to use this method, they should use a considerably lower rate of about 5%.

Approaches to Measuring Social Discount Rate: A Bangladesh Perspective

Social discount rate (SDR) reflects a society’s relative valuation on today’s well-being versus well-being in the future. This paper reviews various methods of measuring social discount rate, with particular emphasis on Social Rate of Time Preference (SRTP) and Social Opportunity Cost of Capital (SOC) framework. The author then employs Monte Carlo Simulation to calculate SRTP value for Bangladesh followed by one using SOC framework. The final result suggests that the Government of Bangladesh should use a value between 9-11% as optimal Social Discount Rate for various long term projects. The discount rate is similar to the ones used by Government of Pakistan, India and China

Appropriate Discounting for Benefit-Cost Analysis

In order to be sensible about what discount rate to use one must be clear about its purpose. We suggest that its purpose is to help select those projects that will contribute more net benefits than some other discount rate. This approach, which is after all the foundation for benefit-cost analysis, helps to reconcile different suggested procedures for determining the discount rate. We suggest that the social opportunity cost of capital (SOC) is superior to other suggested approaches in its generality and its ease of use. We use the SOC to determine a range of real rates that vary between 6% and 8%. We suggest that approaches based on determination of preferences, which result in hyperbolic discounting, are less appropriate and less useful.