PROJECT INVESTMENT ANALYSIS AND ANTICIPATED GOVERNMENT MANDATED EXPENDITURE

BECAUSE OF GOVERNMENT REGULATIONS IN THE AREAS OF POLLUTION AND SAFETY, FIRMS HAVE HAD TO MAKE INVESTMENTS THAT WOULD NOT SATISFY THE RATE OF RETURN CRITERIA. WHEN SUCH REGULATIONS ARE LEGISLATED, THE FIRM HAS THE OPTIONS OF IMMEDIATELY MAKING THE APPROPRIATE INVESTMENTS, DELAYING INVESTMENTS, OR LEAVING THE INDUSTRY. THE SUGGESTED APPROACH IS TO USE NET PRESENT VALUE TECHNIQUES TO EVALUATE EACH ALTERNATIVE. MOST INFORMATION FOR SUCH AN ANALYSIS IS AVAILABLE SUCH AS RISK AND THE COST OF THE EQUIPMENT. THE ONLY 2 VARIABLE FACTORS ARE THE PROBABILITY OF ENFORCED GOVERNMENT REGULATION AND, IF EQUIPMENT IS PURCHASED BEFORE ANTICIPATED LEGISLATION, WHETHER IT WILL BE ADEQUATE. A NET PRESENT VALUE MODEL HAS BEEN DEVELOPED WHICH INCLUDES THE ABOVE MENTIONED AS WELL AS OTHER FACTORS SUCH AS INFLATION TO EVALUATE THESE SITUATIONS. TABLES. REFERENCES.