3052 ✦ Chapter 52: Analyses Figure 52.5 Performing a Benefit-Cost Ratio Analysis Computing a Uniform Periodic Equivalent Suppose you need a warehouse for ten years. You have two options: pay rent for ten years at $23,000 per year build a two-stage facility that you will maintain and which you intend to sell at the end of those ten years Data sets describing these scenarios are available in the portfolio SASHELP.INVSAMP.BUYRENT . Which option is more financially sound if you desire a 12% MARR? Open the portfolio SASHELP.INVSAMP.BUYRENT and compare the options. To perform the periodic equivalent, follow these steps: 1. Load the portfolio SASHELP.INVSAMP.BUYRENT. 2. Select both cashflows. 3. Select Analyze ! Periodic Equivalent. This opens the Uniform Periodic Equivalent dialog box. 4. Enter 01JAN1996 for the Start Date. 5. Enter 10 for the Number of Periods. Performing a Breakeven Analysis ✦ 3053 6. Select YEAR for the Interval. 7. Enter 12 for the Constant MARR. 8. Click Create Time Value Summary. Figure 52.6 Computing a Uniform Periodic Equivalent Figure 52.6 indicates that renting costs about $1,300 less each year. Hence, renting is more financially sound. Notice the periodic equivalent for renting is not $23,000. This is because the $23,000 per year does not account for the MARR. Performing a Breakeven Analysis In the previous example you computed the uniform periodic equivalent for a rent-buy scenario. Now let’s perform a breakeven analysis to see how the MARR affects the time values. To perform the breakeven analysis, follow these steps: 1. Select both options. 2. Select Analyze ! Breakeven Analysis. 3. Enter 01JAN1996 for the Date. 4. Enter 12.0 for Value. 5. Enter 4.0 for (+/-). 3054 ✦ Chapter 52: Analyses 6. Enter 0.5 for Increment by. 7. Click Create Breakeven Analysis Summary to fill the Breakeven Analysis Summary area as displayed in Figure 52.7. Figure 52.7 Performing a Breakeven Analysis Click Graphics to view a plot displaying the relationship between time value and MARR. Dialog Box Guide ✦ 3055 Figure 52.8 Viewing a Breakeven Graph As shown in Figure 52.8, renting is better if you want a MARR of 12%. However, if your MARR should drop to 10.5%, buying would be better. With a single investment, knowing where the graph has a time value of 0 tells the MARR when a venture switches from being profitable to being a loss. With multiple investments, knowing where the graphs for the various investments cross each other tells at what MARR a particular investment becomes more profitable than another. Dialog Box Guide Time Value Analysis Having selected a generic cashflow from the Investment Analysis dialog box, to perform an time value analysis, select Analyze ! Time Value from the Investment Analysis dialog box’s menu bar. This opens the Time Value Analysis dialog box displayed in Figure 52.9. 3056 ✦ Chapter 52: Analyses Figure 52.9 Time Value Analysis Dialog Box The following items are displayed: Analysis Specifications Dates holds the list of dates as of which to perform the time value analysis. Right-clicking within the Dates area reveals many helpful tools for managing date lists. Constant MARR holds the desired MARR for the time value analysis. This value is used if the MARR List area is empty. MARR List holds date-rate pairs that express your desired MARR as it changes over time. Each date refers to when that expected MARR begins. Right-clicking within the MARR List area reveals many helpful tools for managing date-rate pairs. Create Time Value Summary becomes available when you adequately specify the analysis within the Analysis Specifications area. Clicking Create Time Value Summary then fills the Time Value Summary area. Time Value Summary fills when you click Create Time Value Summary . The table contains a row for each date in the Dates area. The remainder of each row holds the time values at that date, one value for each investment selected. Print becomes available when you fill the time value summary. Clicking it sends the contents of the summary to the SAS session print device. Save Data As becomes available when you fill the time value summary. Clicking it opens the Save Output Dataset dialog box where you can save the summary (or portions thereof) as a SAS Dataset. Return takes you back to the Investment Analysis dialog box. Uniform Periodic Equivalent ✦ 3057 Uniform Periodic Equivalent Having selected a generic cashflow from the Investment Analysis dialog box, to perform a uniform periodic equivalent, select Analyze ! Periodic Equivalent from the Investment Analysis dialog box’s menu bar. This opens the Uniform Periodic Equivalent dialog box displayed in Figure 52.10. Figure 52.10 Uniform Periodic Equivalent Dialog Box The following items are displayed: Analysis Specifications Start Date holds the date the uniform periodic equivalents begin. Number of Periods holds the number of uniform periodic equivalents. Interval holds how often the uniform periodic equivalents occur. Constant MARR holds the Minimum Attractive Rate of Return. Create Periodic Equivalent Summary becomes available when you adequately fill the Analysis Specification area. Clicking Create Periodic Equivalent Summary then fills the periodic equivalent summary. Periodic Equivalent Summary fills with two columns when you click Create Periodic Equivalent Summary . The first column lists the investments selected. The second column lists the computed periodic equivalent amount. Print becomes available when you fill the periodic equivalent summary. Clicking it sends the contents of the summary to the SAS session print device. Save Data As becomes available when you generate the periodic equivalent summary. Clicking it opens the Save Output Dataset dialog box where you can save the summary (or portions thereof) as a SAS Dataset. 3058 ✦ Chapter 52: Analyses Return takes you back to the Investment Analysis dialog box. Internal Rate of Return Having selected a generic cashflow from the Investment Analysis dialog box, to perform an internal rate of return calculation, select Analyze ! Internal Rate of Return from the Investment Analysis dialog box’s menu bar. This opens the Internal Rate of Return dialog box displayed in Figure 52.11. Figure 52.11 Internal Rate of Return Dialog Box The following items are displayed: IRR Summary contains a row for each deposit. Each row holds: Name holds the name of the investment. IRR holds the internal rate of return for that investment. interval holds the interest rate interval for that IRR. Print becomes available when you fill the IRR summary. Clicking it sends the contents of the summary to the SAS session print device. Save Data As opens the Save Output Dataset dialog box where you can save the IRR summary (or portions thereof) as a SAS data set. Return takes you back to the Investment Analysis dialog box. Benefit-Cost Ratio Analysis Having selected a generic cashflow from the Investment Analysis dialog box, to compute a benefit- cost ratio, select Analyze ! Benefit-Cost Ratio from the Investment Analysis dialog box’s menu bar. This opens the Benefit-Cost Ratio Analysis dialog box displayed in Figure 52.12. Benefit-Cost Ratio Analysis ✦ 3059 Figure 52.12 Benefit-Cost Ratio Analysis Dialog Box The following items are displayed: Analysis Specifications Dates holds the dates as of which to compute the Benefit-Cost ratios. Constant MARR holds the desired MARR. This value is used if the MARR List area is empty. MARR List holds date-rate pairs that express your desired MARR as it changes over time. Each date refers to when that expected MARR begins. Right-clicking within the MARR List area reveals many helpful tools for managing date-rate pairs. Create Benefit-Cost Ratio Summary becomes available when you adequately specify the analysis. Clicking Create Benefit-Cost Ratio Summary fills the benefit-cost ratio summary. Benefit-Cost Ratio Summary fills when you click Exchange the Rates . The area contains a row for each date in the Dates area. The remainder of each row holds the benefit-cost ratios at that date, one value for each investment selected. Print becomes available when you fill the benefit-cost ratio summary. Clicking it sends the contents of the summary to the SAS session print device. Save Data As becomes available when you generate the benefit-cost ratio summary. Clicking it opens the Save Output Dataset dialog box where you can save the summary (or portions thereof) as a SAS Dataset. Return takes you back to the Investment Analysis dialog box. 3060 ✦ Chapter 52: Analyses Breakeven Analysis Having selected a generic cashflow from the Investment Analysis dialog box, to perform a breakeven analysis, select Analyze ! Breakeven Analysis from the Investment Analysis dialog box’s menu bar. This opens the Breakeven Analysis dialog box displayed in Figure 52.13. Figure 52.13 Breakeven Analysis Dialog Box The following items are displayed: Analysis Specification Analysis holds the analysis type. Only Time Value is currently available. Date holds the date for which you perform this analysis. Variable holds the variable upon which the breakeven analysis will vary. Only MARR is currently available. Value holds the desired rate upon which to center the analysis. +/- holds the maximum deviation from the Value to consider. Increment by holds the increment by which the analysis is calculated. Create Breakeven Analysis Summary becomes available when you adequately specify the analysis. Clicking Create Breakeven Analysis Summary then fills the Breakeven Analysis Summary area. Breakeven Analysis Summary fills when you click Create Breakeven Analysis Summary . The schedule contains a row for each MARR and date. Graphics becomes available when you fill the Breakeven Analysis Summary area. Clicking it opens the Breakeven Graph graph representing the time value versus MARR. Breakeven Graph ✦ 3061 Print becomes available when you fill the breakeven analysis summary. Clicking it sends the contents of the summary to the SAS session print device. Save Data As becomes available when you generate the breakeven analysis summary. Clicking it opens the Save Output Dataset dialog box where you can save the summary (or portions thereof) as a SAS Dataset. Return takes you back to the Investment Analysis dialog box. Breakeven Graph Suppose you perform a breakeven analysis in the Breakeven Analysis dialog box. Once you create the breakeven analysis summary, you can click the Graphics button to open the Breakeven Graph dialog box displayed in Figure 52.14. Figure 52.14 Breakeven Graph Dialog Box The following item is displayed: Return takes you back to the Breakeven Analysis dialog box. . Analyze ! Periodic Equivalent. This opens the Uniform Periodic Equivalent dialog box. 4. Enter 01JAN 199 6 for the Start Date. 5. Enter 10 for the Number of Periods. Performing a Breakeven Analysis ✦. follow these steps: 1. Select both options. 2. Select Analyze ! Breakeven Analysis. 3. Enter 01JAN 199 6 for the Date. 4. Enter 12.0 for Value. 5. Enter 4.0 for (+/-). 3054 ✦ Chapter 52: Analyses 6 menu bar. This opens the Time Value Analysis dialog box displayed in Figure 52 .9. 3056 ✦ Chapter 52: Analyses Figure 52 .9 Time Value Analysis Dialog Box The following items are displayed: Analysis