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