Fulbright Economics Teaching Program
2005-2006
The Appraisal of development expenditures
Cao Hào Thi 1
Lecture 4
1
CAO HAØO THI
INTERDEPENCES
AMONG PROJECTS
2
INTERDEPENDENCES AMONG
PROJECTS
z Projects combinations
z Complementarity and substitutability
among projects
z Replacement of asset
Fulbright Economics Teaching Program
2005-2006
The Appraisal of development expenditures
Cao Hào Thi 2
Lecture 4
3
PROJECTS COMBINATIONS
z n projects: A, B and C
z Evaluating 2
n
combinations
ª A
ª B
ª C
ª A,B
ª A,C
ª B,C
ª A,B,C
ª Alternative 0
4
COMPLIMENTARITY &
SUBSTITUTABILITY
1 + 1 = ?
Fulbright Economics Teaching Program
2005-2006
The Appraisal of development expenditures
Cao Hào Thi 3
Lecture 4
5
COMPLIMENTARITY &
SUBSTITUTABILITY, BENEFITS
z Independent
PVB
I
+ PVB
II
= PVB
I + ii
z Substitute
PVB
I
+ PVB
II
> PVB
I + ii
z Complement
PVB
I
+ PVB
II
< PVB
I + ii
6
COMPLIMENTARITY &
SUBSTITUTABILITY, COSTS
z Independent
PVC
I
+ PVC
II
= PVC
I + ii
z Substitute
PVC
I
+ PVC
II
< PVC
I + ii
z Complement
PVC
I
+ PVC
II
> PVC
I + ii
Fulbright Economics Teaching Program
2005-2006
The Appraisal of development expenditures
Cao Hào Thi 4
Lecture 4
7
COMPLIMENTARITY &
SUBSTITUTABILITY
Benefits
Costs
Independent
Not
interested
Complement
Combine
?
Substitute Do not
combine
?
Complement SubstituteIndependent
Combine
Combine
Do not
combine
Do not
combine
8
ASSET REPLACEMENT
z Keep old asset, do not buy new
z Sell old asset, purchase new
z Keep old asset, additionally
purchase new
. HAØO THI
INTERDEPENCES
AMONG PROJECTS
2
INTERDEPENDENCES AMONG
PROJECTS
z Projects combinations
z Complementarity and substitutability
among projects
z. Appraisal of development expenditures
Cao Hào Thi 2
Lecture 4
3
PROJECTS COMBINATIONS
z n projects: A, B and C
z Evaluating 2
n
combinations
ª A
ª B
ª C
ª