SAS/ETS 9.22 User''''s Guide 306 pptx

3042 F Chapter 51: ComputationsFigure 51.7 CD Values after Deflation You can save the deflated cashflow to a SAS data set for use in an internal rate of return analysis or breakeven anal

3042 F Chapter 51: Computations

Figure 51.7 CD Values after Deflation

You can save the deflated cashflow to a SAS data set for use in an internal rate of return analysis or breakeven analysis

Click Return to return to the Investment Analysis dialog box

Dialog Box Guide

After Tax Cashflow Calculation

Having selected a generic cashflow from the Investment Analysis dialog box, to perform an after tax calculation, select Compute! After Tax from the Investment Analysis dialog box’s menu bar This opens the After Tax Cashflow Calculation dialog box displayed inFigure 51.8

Figure 51.8 After Tax Cashflow Calculation Dialog Box

The following items are displayed:

Name holds the name of the investment for which you are computing the after-tax cashflow

Federal Tax holds the federal tax rate (a percentage between 0% and 100%)

Local Tax holds the local tax rate (a percentage between 0% and 100%)

Combined Tax holds the effective tax rate from federal and local income taxes

Create After Tax Cashflow becomes available when Combined Tax is not empty Clicking Create After Tax Cashflow then fills the After Tax Cashflow area

After Tax Cashflow fills when you click Create After Tax Cashflow It holds a list of date-amount pairs where the amount is the amount retained after taxes for that date

Print becomes available when you fill the after-tax cashflow Clicking it sends the contents of the after tax cashflow to the SAS session print device

Save Data As becomes available when you fill the after tax cashflow Clicking it opens theSave Output Datasetdialog box where you can save the resulting cashflow (or portions thereof) as a SAS Dataset

Return returns you to theInvestment Analysisdialog box

Currency Conversion

Having selected a generic cashflow from the Investment Analysis dialog box, to perform a currency

3044 F Chapter 51: Computations

Figure 51.9 Currency Conversion Dialog Box

The following items are displayed:

Name holds the name of the investment to which you are applying the currency conversion From Currency holds the name of the currency the cashflow currently represents

To Currency holds the name of the currency to which you wish to convert

Exchange Rate holds the rate of exchange between the From Currency and the To Currency Apply Currency Conversion becomes available when you fill Exchange Rate Clicking Apply Currency Conversion fills the Currency Conversion area

Currency Conversion fills when you click Apply Currency Conversion The schedule contains a row for each cashflow item with the following information:

 Date is a SAS date within the cashflow

 The From Currency value is the amount in the original currency at that date

 The To Currency value is the amount in the new currency at that date

Print becomes available when you fill the Currency Conversion area Clicking it sends the contents

of the conversion table to the SAS session print device

Save Data As becomes available when you fill the Currency Conversion area Clicking it opens theSave Output Datasetdialog box where you can save the conversion table (or portions thereof) as

a SAS Dataset

Return returns you to theInvestment Analysisdialog box

Constant Dollar Calculation

Having selected a generic cashflow from the Investment Analysis dialog box, to perform a constant dollar calculation, select Compute! Constant Dollars from the Investment Analysis dialog box’s menu bar This opens the Constant Dollar Calculation dialog box displayed inFigure 51.10

Figure 51.10 Constant Dollar Calculation Dialog Box

The following items are displayed:

Name holds the name of the investment for which you are computing the constant dollars value Constant Inflation Rate holds the constant inflation rate (a percentage between 0% and 120%) This value is used if the Variable Inflation List area is empty

Variable Inflation List holds date-rate pairs that describe how inflation varies over time Each date

is a SAS date, and the rate is a percentage between 0% and 120% Each date refers to when that inflation rate begins Right-clicking within the Variable Inflation area reveals many helpful tools for managing date-rate pairs If you assume a fixed inflation rate, just insert that rate in Constant Rate Dates holds the SAS date(s) at which you wish to compute the constant dollar equivalent Right-clicking within the Dates area reveals many helpful tools for managing date lists

Create Constant Dollar Equivalent becomes available when you enter inflation rate information Clicking it fills the constant dollar equivalent summary with the computed constant dollar values Constant Dollar Equivalent Summary fills with a summary when you click Create Constant

3046 F Chapter 51: Computations

Print becomes available when you fill the constant dollar equivalent summary Clicking it sends the contents of the summary to the SAS session print device

Save Data As becomes available when you fill the constant dollar equivalent summary Clicking it opens theSave Output Datasetdialog box where you can save the summary (or portions thereof) as a SAS Dataset

Return returns you to theInvestment Analysisdialog box

Contents

The Analyze Menu 3047

Tasks 3048

Performing Time Value Analysis 3048

Computing an Internal Rate of Return 3050

Performing a Benefit-Cost Ratio Analysis 3051

Computing a Uniform Periodic Equivalent 3052

Performing a Breakeven Analysis 3053

Dialog Box Guide 3055

Time Value Analysis 3055

Uniform Periodic Equivalent 3057

Internal Rate of Return 3058

Benefit-Cost Ratio Analysis 3058

Breakeven Analysis 3060

Breakeven Graph 3061

The Analyze Menu

Figure 52.1shows the Analyze menu

Figure 52.1 Analyze Menu

3048 F Chapter 52: Analyses

Time Value opens theTime Value Analysisdialog box Time value analysis involves moving money through time across a defined minimum attractive rate of return (MARR) so that you can compare value at a consistent date The MARR can be constant or variable over time

Periodic Equivalent opens theUniform Periodic Equivalentdialog box Uniform periodic equiva-lent analysis determines the payment needed to convert a cashflow to uniform amounts over time, given a periodicity, a number of periods, and a MARR This option helps when making comparisons where one alternative is uniform (such as renting) and another is not (such as buying)

Internal Rate of Return opens theInternal Rate of Returndialog box The internal rate of return

of a cashflow is the interest rate that makes the time value equal to 0 This calculation assumes uniform periodicity of the cashflow It is particularly applicable where the choice of MARR would

be difficult

Benefit-Cost Ratio opens theBenefit-Cost Ratio Analysisdialog box The benefit-cost ratio divides the time value of the benefits by the time value of the costs For example, governments often use this analysis when deciding whether to commit to a public works project

Breakeven Analysis opens theBreakeven Analysisdialog box Breakeven analysis computes time values at various MARRs to compare, which can be advantageous when it is difficult to determine a MARR This analysis can help you determine how the cashflow’s profitability varies with your choice

of MARR A graph displaying the relationships between time value and MARR is also available

Tasks

Performing Time Value Analysis

Suppose a rock quarry needs equipment to use the next five years It has two alternatives:

 a box loader and conveyer system that has a one-time cost of $264,000

 a two-shovel loader, which costs $84,000 but has a yearly operating cost of $36,000 This loader has a service life of three years, which necessitates the purchase of a new loader for the final two years of the rock quarry project Assume the second loader also costs $84,000 and its salvage value after its two-year service is $10,000 A SAS data set that describes this is available atSASHELP.ROCKPIT

You expect a 13% MARR Which is the better alternative?

To create the cashflows, follow these steps:

1 Create a cashflow with the single amount –264,000 Date the amount 01JAN1998 to be consistent with the SAS data set you load

2 LoadSASHELP.ROCKPITinto a second cashflow, as displayed inFigure 52.2

Figure 52.2 The contents ofSASHELP.ROCKPIT

To compute the time values of these investments, follow these steps:

1 Select both cashflows

2 Select Analyze! Time Value This opens the Time Value Analysis dialog box

3 Enter the date 01JAN1998 into the Dates area

4 Enter 13 for the Constant MARR

5 Click Create Time Value Summary

3050 F Chapter 52: Analyses

Figure 52.3 Performing the Time Value Analysis

As shown in Figure 52.3, option 1 has a time value of –$264,000.00 naturally on 01JAN1998 However, option 2 has a time value of –$263,408.94, which is slightly less expensive

Computing an Internal Rate of Return

You are choosing between five investments A portfolio containing these investments is available at

SASHELP.INVSAMP.NVST Which investments are acceptable if you expect a MARR of 9%?

Open the portfolioSASHELP.INVSAMP.NVSTand compare the investments Note that Internal Rate

of Return computations assume regular periodicity of the cashflow To compute the internal rates of return, follow these steps:

1 Select all five investments

2 Select Analyze! Internal Rate of Return

Figure 52.4 Computing an Internal Rate of Return

The results displayed inFigure 52.4indicate that the internal rates of return for investments 2, 4, and

5 are greater than 9% Hence, each of these is acceptable

Performing a Benefit-Cost Ratio Analysis

Suppose a municipality has excess funds to invest It is choosing between the same investments described in the previous example Government agencies often compute benefit-cost ratios to decide which investment to pursue Which is best in this case?

Open the portfolioSASHELP.INVSAMP.NVSTand compare the investments

To compute the benefit-cost ratios, follow these steps:

1 Select all five investments

2 Select Analyze! Benefit-Cost Ratio

3 Enter 01JAN1996 for the Date

4 Enter 9 for Constant MARR

5 Click Create Benefit-Cost Ratio Summary to fill the Benefit-Cost Ratio Summary area The results displayed inFigure 52.5indicate that investments 2, 4, and 5 have ratios greater than 1 Therefore, each is profitable with a MARR of 9%