An Economic Analysis of GRDC Investment in Minor Use Chemicals

Results
All past costs and benefits were expressed in 2010/11 dollar terms using the CPI. All
benefits after 2010/11 were expressed in 2010/11 dollar terms. All costs and
benefits were discounted to 2010/11 using a discount rate of 5%. The base run used
the best estimates of each variable, notwithstanding a high level of uncertainty for
many of the estimates. All analyses ran for the length of the investment period plus
30 years from the last year of investment to the final year of benefits assumed.
Investment criteria were estimated for both total investment and for the GRDC
investment alone. Each set of investment criteria were estimated for different
periods of benefits. The investment criteria were all highly positive as reported in
Tables 15 and 16. A feature of the analysis is the rapid early increase in benefits
reflecting the rapid adoption achieved in the early years of the investment.
Table 15: Investment Criteria for the Total Investment and Total Benefits for Each
Benefit Period from 2009/10 (discount rate 5%)
Criterion
Years from 2009/10
0 5 10 15 20 25 30
Present value of benefits (m$) 39.7 42.2 42.2 42.2 42.2 42.2 42.2
Present value of costs (m$) 3.2 3.2 3.2 3.2 3.2 3.2 3.2
Net present value (m$) 36.5 39.0 39.0 39.0 39.0 39.0 39.0
Benefit cost ratio 12.4 13.1 13.1 13.1 13.1 13.1 13.1
Internal rate of return* (%) na na na na na na na
Note: * The internal rate of return was not calculable because of the time pattern and magnitude of
benefits in relation to costs
Table 16: Investment Criteria for the GRDC Investment and Benefits to
GRDC for Each Benefit Period from 2009/10 (discount rate 5%)
Criterion
Years from 2009/10
0 5 10 15 20 25 30
Present value of benefits (m$) 26.2 27.9 27.9 27.9 27.9 27.9 27.9
Present value of costs (m$) 2.1 2.1 2.1 2.1 2.1 2.1 2.1
Net present value (m$) 24.1 25.8 25.8 25.8 25.8 25.8 25.8
Benefit cost ratio 12.4 13.2 13.2 13.2 13.2 13.2 13.2
Internal rate of return* (%) na na na na na na na
Note: * An internal rate of return was not available because it was not calculable because of the time
pattern and magnitude of benefits in relation to costs.
The annual cash flows of undiscounted benefits are shown in Figure 1. The pattern
reflects the assumptions made particularly with respect to the assumptions made in
relation to the Without investment scenario. The key one was that equivalent
alternative approaches to GRDC investment in MUP would have been developed over
the period to 2014.
The contributions from the two components of total benefits that were measured are
presented in Table 17.
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