Conservation Buffers Economic and Financial Feasibility Economic Feasibility

Conservation Buffers Economic and Financial Feasibility

Economic Feasibility • Answers whether or not the contemplated investment has benefits that exceed the associated costs over some period of evaluation (usually the expected useful life of the investment. • Or in simple terms: Is it worth it and going to pay for itself?

Financial Feasibility • Answers whether or not the producer has the cash-flow and/or credit-worthiness to “carry” the costs of the investment until the cumulative benefits of the investment begin to exceed the original investment (capital cost) and the associated operation and maintenance costs. • Or in simple terms: Can I afford it? Am I able to do it?

Economics of Buffers • • Is it worth it? Will it pay for itself? Can I afford it? Am I financially able to do do it?

Big Picture - Long Term • How do buffer practices impact land values and marketability of the real estate? • Are there other long term effects from altering the land use to install buffers?

Net Returns • Net Returns are used to determine Economic Feasibility. • Net Returns are Income minus Costs. • Compares current situation to with conservation buffer alternatives. • Answer the questions “Is it worth it & Does it pay for itself? ”

Net Returns used to Calculate Net Present Value or NPV • Net Returns are calculated over the buffer practice expected (design life span); then are converted to present values. The alternative with the greatest NPV is the most cost effective (economically feasible). • PV functions are used in spreadsheet tools to determine NPV of alternatives.

Other Economic Feasibility Tools • Other evaluation tools like breakeven and partial budgeting may also be used in considering Economic Feasibility. • Only use economic tools as needed. Or in other words “Never beat on something with a large wrench, if a smaller one will do. ”

Financial Feasibility • Cash Flow analysis of expected amount and timing of dollars in & out. • Credit needs and repayment plan. • Producer needs buffer technical specifications to complete this analysis.

Conservation Effects for Decision-making (CED) Tool • T-Chart Format to organize and present positive and negative effects of a conservation option. • Identify & Measure conservation effects • Use to assist Producer in making a decision.

Buffer Feasibility Technical, Economic, & Financial Feasibility depends site specific conditions of each producer.