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Instructions for Using the Calculator
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User Entry
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Step 1 - Enter the amount of your per acre investment in
the highlighted cell.
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Resource
- University of Wyoming Custom Rates
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Step 2 - Enter the discount rate you wish to use.
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5% -
Low Risk Enterpise 10% - Moderate
Risk 15% - High Risk
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At a
minimum you should use the interest rate from a loan, or savings rate.
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Add
to the interest rate a factor depending on how risky you percieve the
investment.
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Step 3 - Enter the amount it would cost to lease an AUM.
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Step 4 - Enter your annual costs
for the improvement project.
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Step 5 - Enter the expected
annual AUM improvement as a result of the project.
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Resource
- Chapter 5 of the Nation Range and Pasture Handbook (Developed by the NRCS)
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Results
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5, 10 and 15 year Net Present
Value (NPV) is calculated.
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NPV
- is used to calculate the value of the improvement project while accounting
for risk and opportunities of
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investing
capital in other ventures.
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A break-even year for the investiment is calculated. This calcualtion also accounts for the NPV.
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Detailed Results
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Total Cost - Investment cost
plus annual cost
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Revenue - AUM price multiplied
by the number of additional AUMs as a result of the improvement project
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Net Return - The difference
between Revenue and Total Cost.
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Discount Factor - This value is
calculated based on the discount rate entered in the input section.
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NPV - The annual value of the
net return after discounting for risk and opportunity costs.
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Cummulative NPV - Total value of
the net return after discounting for risk and opportunity costs.
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