Artificial project time horizons in the absence of discounting: The case of Canyon Forest Village: Working paper series--06-11

In the summer of 1997, the Kaibab National Forest released the Draft Environmental Impact Statement for Tusayan Growth. This report analyzed various scenarios involving the transfer of National Forest land at the boundary of the Grand Canyon National Park to a private developer, in exchange for private inholdings scattered throughout the Kaibab National Forest in northern Arizona. The resulting private development was to be called Canyon Forest Village, and would include hotels, visitor facilities, private housing, community facilities and a transportation center for tourists accessing the Grand Canyon. The proposed build out of Canyon Forest Village (CFV) was to take place from 1999 to 2010. Consequently, the Forest Service analysis used that time frame as the basis for calculating the economic impacts CFV would be expected to have on local economies in the northern Arizona region. The Draft Environmental Impact Statement (EIS) concluded that overall growth in demand for lodging in northern Arizona would be robust over those years, and that CFV would have no net negative impacts. The results of the Draft EIS were sharply contested during the public comment phase, and, in the summer of 1998, a Supplement to the Draft Environmental Impact Statement for Tusayan Growth was issued. This document used a different modeling procedure and changed its primary focus to two, smaller, CFV proposals, involving only 900 and 1,270 hotel rooms. The Supplement did conclude that there would be some negative impacts to the communities surrounding Grand Canyon. The results of the Supplemental Draft EIS were also contested during the public comment phase following its release, although a year later, in the summer of 1999, the Forest Service issued a Final EIS and adopted the CFV proposal for 1,270 rooms. One peculiarity of the Forest Service reports, throughout this process, was the failure to identify an explicit discount rate of interest in order to identify costs and benefits in terms of their present value. While EIS documentation has been required for many years, the obvious focus is on purely environmental concerns and the analyses tend to be based on scientific findings. The inclusion of a socioeconomic analysis necessitates a careful accounting of benefits and costs. While this EIS is not the first to include an explicit accounting of economic benefits and costs, it may serve as a harbinger of more reporting of this type. Unless those with an appreciation of the discounting process, especially economists and accountants, are included in these analyses, present values may be employed only on an erratic basis, making the results of such reports difficult, if not impossible, to adequately interpret. This article applies basic and commonly accepted time value of money principles to an EIS report. Although an economic analysis was provided as part of the report, the time value of money was ignored. In order to present a viable economic impact, these basic financial tenants must be employed. The authors used basic time value of money principles with reasonable discount rates. The result is that impacts could be as much as six times greater than the values given by the Forest Service, representing upwards of one hundred and fifty million dollars

Deciding When To Initiate Social Security Benefits

People nearing retirement face a well-known decision: When should to begin taking social security benefits? The answer may not seem obvious since there are key trade-offs involved. The retiree can choose low benefits for a longer period of time, or high benefits for a shorter period of time, or something in between.  The optimal initiation date that maximizes social security wealth is a quantitative question and it depends on the life expectancy of the person and on the real rate of return they expect to earn on their investments, among other things. We attempt to provide some answers to this practical and important question.  Our focus throughout is on relatively high-wealth individuals who will receive the maximum social security benefits.  We show how the government’s social security benefit calculator can be very misleading. We also include how the decision may be different for a married couple.  We conclude with the following rough guideline.  If you expect to make a good return on your investments, you should take the benefits early (i.e. at age 62).  If you expect to make modest investment returns and you expect to live a long time, you should take the benefits later, (i.e. at age 70)

Artificial Project Time Horizons In The Absence Of Discounting: The Case Of Canyon Forest Village

In the summer of 1997, the Kaibab National Forest released the Draft Environmental Impact Statement for Tusayan Growth. This report analyzed various scenarios involving the transfer of National Forest land at the boundary of the Grand Canyon National Park to a private developer, in exchange for private inholdings scattered throughout the Kaibab National Forest in northern Arizona. The resulting private development was to be called Canyon Forest Village, and would include hotels, visitor facilities, private housing, community facilities and a transportation center for tourists accessing the Grand Canyon. The proposed build out of Canyon Forest Village (CFV) was to take place from 1999 to 2010. Consequently, the Forest Service analysis used that time frame as the basis for calculating the economic impacts CFV would be expected to have on local economies in the northern Arizona region. The Draft Environmental Impact Statement (EIS) concluded that overall growth in demand for lodging in northern Arizona would be robust over those years, and that CFV would have no net negative impacts. The results of the Draft EIS were sharply contested during the public comment phase, and, in the summer of 1998, a Supplement to the Draft Environmental Impact Statement for Tusayan Growth was issued. This document used a different modeling procedure and changed its primary focus to two, smaller, CFV proposals, involving only 900 and 1,270 hotel rooms. The Supplement did conclude that there would be some negative impacts to the communities surrounding Grand Canyon. The results of the Supplemental Draft EIS were also contested during the public comment phase following its release, although a year later, in the summer of 1999, the Forest Service issued a Final EIS and adopted the CFV proposal for 1,270 rooms. One peculiarity of the Forest Service reports, throughout this process, was the failure to identify an explicit discount rate of interest in order to identify costs and benefits in terms of their present value. While EIS documentation has been required for many years, the obvious focus is on purely environmental concerns and the analyses tend to be based on scientific findings. The inclusion of a socioeconomic analysis necessitates a careful accounting of benefits and costs. While this EIS is not the first to include an explicit accounting of economic benefits and costs, it may serve as a harbinger of more reporting of this type. Unless those with an appreciation of the discounting process, especially economists and accountants, are included in these analyses, present values may be employed only on an erratic basis, making the results of such reports difficult, if not impossible, to adequately interpret. This article applies basic and commonly accepted time value of money principles to an EIS report. Although an economic analysis was provided as part of the report, the time value of money was ignored. In order to present a viable economic impact, these basic financial tenants must be employed. The authors used basic time value of money principles with reasonable discount rates. The result is that impacts could be as much as six times greater than the values given by the Forest Service, representing upwards of one hundred and fifty million dollars

The Colorado River Experience: Assessing The Value Of Motorized Rafting

Although free markets provide superior solutions to resource allocation, the National Park Service controls access, use, and mode of travel on the Colorado River through the canyon. There is an aggregate number of “user days” allowed for the river. There is a split between motorized and non-motorized travel, and daily limits on the types of trips that can be launched from Lees Ferry, the starting point for Grand Canyon river trips. This paper explores a rather straightforward economic question – How much would it take to entice existing motorized providers to switch to oar powered rafts? Available data allows the development of different scenarios to determine the cost of enticing motorized providers to switch to nonmotorized guided trips. However, there is also intrinsic some providers possess which may make change a purely economic decision to one with other values

Northland Preparatory Academy: An Expansion Controversy

This paper deals with a real case in a real situation.  Northland Preparatory Academy (NPA) is a college-preparatory charter school located in Flagstaff, Arizona.  In 2004, the school board had to decide whether to expand.  Their expansion decision was driven by (1) a desire for additional programs in fine arts and music, (2) a desire for a gymnasium for extra curriculum activities, athletics, and related programs, and (3) a belief that the expansion would help with NPA’s retention problem at the high school level.   The school’s principal and several of the school board members were leaning toward constructing a new building.   However, there was a minority group on the school board which was adamantly opposed to any expansion and the taking on new debt.  Bill Johnson, the school’s principal, had been asked by the Chairman of the school board to develop three years’ worth of projected financial statements and forecasted cash flow statements assuming that expansion did take place.  In addition, Bill was challenged to present information as to whether a new bank loan or taking out a new bond would be best for the school

Deployable Solar Array Structure: G1:3

This design project is in response to an AIAA RFP (Request-For-Proposal) to build a compact, durable, non-hinged solar array to be deployed from a spacecraft on its way from the Earth to Mars. The solar array structures are used to provide the continual supply of power to operate onboard equipment. A large array will be required but must fit within the fairing of the launch vehicle. Origami principles will be utilized to fit the given constrained stored volume of 10 cm3 while satisfying the power requirements and avoiding structural complications due to tight folds

Business Process Modeling, Activity-Based Management, And Decision Support Systems: The Case Of B&B Plumbing

This case was designed to be used as a resource for professors who are interested in using decision support systems to teach activity-based management.  Specifically, we developed the case for use with Hyperion Software’s Activity-Based Management application, formerly called NetProphet II by Sapling Corp. Professors wishing to use this, or other activity-based management software, have trouble finding non-proprietary materials for use in teaching with the software. We developed this case to address this need. Although the case was designed for use with this decision-support application, its usefulness extends beyond that for two reasons.  First, the case involves developing a business process model, first from a workflow, or engineering perspective, then overlaying that model with financial information to create the full business process model. The process model is developed independently of the software used to implement and run the model. The modeling process is important in itself because it focuses student attention on the nature of the work involved and interaction between work flow, resources, constraints, and costing.  A natural result of developing a process model is a greater appreciation for the difficulties inherent in, and the complexity involved with, making sound managerial decisions. Second, the process model can be implemented independently of the software as well. With some effort, a spreadsheet can be used to develop the appropriate formulas, flows, factors, and units of measure based on the workflow, to carry costs down to the appropriate demands. The case involves a plumbing firm, B&B Plumbing that has four lines of business.  Based on the poor operating results of one line of business, management is considering eliminating that line, but they are not sure that the current financial results for each line are indicative of that line’s true performance. Students are to develop or use the business process model for the company to assist management in making the most profitable operating decisions.  They are then to evaluate the business in light of the model and its associated constraints to maximize profits

Qualities of professionalism sought by employers: Exploring, validating, and incentivizing them in business undergraduates: Working paper Series--12-08

What do employers of business-school graduates seek in job candidates? The basic technical knowledge that an accredited degree indicates, and some amount of appropriate work experience, are prerequisites for interviews. But job candidates are then distinguished by various "soft" qualities that can't easily be bulleted on resumes or readily validated by employers. This paper begins with an exploration of framework for these qualities, considered here aspects of professionalism, which is developed from a series of surveys to refine and categorize relevant descriptors. We report the confirmatory findings from a focus group of partners, HR managers, and recruiters from accounting firms - a field which is particularly sensitive to professionalism since new associates have extensive client contact. Then, one business school's novel approach for raising the level of professionalism in undergraduate business students is introduced. The paper includes discussion of the importance and limitations of this topic, and concludes with possible directions for further research

The state of Texas vs the Methodist hospital system: An accounting case study: Working paper series--99-02

Pressures to contain costs have given private hospitals the economic incentive to reduce provision of charity care services, shifting the burden onto government hospitals. Budget pressures on governmental units have produced resistance to any further shift in charity care burden. We observe in a lawsuit (State of Texas vs. Methodist Hospital System [MHS]) what appears to be a classic moral hazard situation. The government expects a certain (unspecified) level of charity care to be performed in exchange for tax exemptions; hospital management allegedly consumes perquisites and overstates reported charity care figures. Both sides use accounting numbers to defend their positions. The Case makes five contributions. First, it is relevant and flexible enough for use in several different accounting or business courses, including financial, audit, tax, not-for-profit, or ethics courses. Second, it provides students an introduction to not-for-profit accounting placed in an interesting and relevant context. Third, students must employ forensic skills, much as did the state attorney general. Fourth, the Case requires students to make several audit-related determinations, including knowledge of a client's business, fraud, and related-party transactions. Finally, as students progress through the case, they are required to consider several ethical issues

Economic and social development stemming from the electrification of the housing stock On The Navajo Nation: Working paper series--02-34

The main body of this report explains the economic and social development aspects stemming from an electrification program on the Navajo Nation. It is estimated that 18,000 housing units are in need of electrification. Given the high costs of connecting distributed houses to the electricity grid, it is recommended that the individual housing units be supplied electricity with individually contained solar and storage systems. In some cases the houses will require retrofitting with wiring. The economic benefits will include increased employment opportunities for tribal members, increased retention of spending on the reservation, secondary employment and sales of various appliances. The social benefits include improved educational success as the home environments improve the study abilities of children, increased oral tradition education as less time is spent on household chores and language preservation. The estimated cost of any program providing electricity and the associated appliances to these homes falls between $115 and$350 million. The appendices of this report include: an estimate for the potential demand by explaining how the value of 18,000 housing units was determined, a brief discussion of the business potentials and employment opportunities, and a fully detailed business plan template for a prospective entrepreneur