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Innovation And Business Development System Add in library

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Question:

The five model require wolfram alpha demonstration i have also upload a example of one model which shows demonstration file named?

 

 

Answer:

Introduction

The business case proposal presents an idea of the use of bio diesel product to protect the environment and save the natural resources from depletion. The bio diesel product will be efficient in the long run than the normal fuel. The business will invest $600,000 million between 2011 to 2020. There are several options that have been considered on comparison of the data that will enhance the productivity with the save of energy and lead to efficient outcomes.

The numerical model will present a justifies the benefits of the use of bio diesel from vegetable oil waste. Bio diesel fuel is an energy efficient fuel that will reduce the adverse impact on the environment.

The mathematical models describe the value of the investment from the perspective of the business as well as the benefits of the customers. The mathematical models that has been used to justify the production of bio diesel fuel from vegetable oil waste are discounted present value, net present value, break even analysis,

 

The importance of the production of bio diesel fuel comes from the depletion of the natural resources as a result of the excessive usage. Bio diesel will serve as an effective way to change the quality of the product by the efficient use of vegetable oil that is free from acids. It has been estimated that the production of biodiesel will eradicate all the problems of depletion of the natural resources in the future (Biofuelsassociation.com.au, 2015).

1. Analysis from the environmental issues perspective:

[a] Net Present value model

Biodiesel is a non toxic fuel that can provide replacement to the conventional petroleum diesel. This will reduce the emission of the toxic gases. It is important to increase the production of biodiesel especially in the environmental sensitive areas in Australia. It is also a choice for the users of heavy equipments for renewable power generation and public transport purpose.

A business model for the calculation of the net present value can be used for the justification of the return from the project.

If the investment of the company in the project brings out negative cash flows which is less than $600,000 from 2011 to 2020 then the company will suffer from loss. But the various options has to be considered in the following cases –

 

Project option 1: Do Nothing

Project option 2:

Project option 3:

Project option 4:

Project option 5:

Analysis Period (years)

3

2

6

2

7

Capital Costs ($m)

23

45

12

56

33

Output Costs ($m)

43

62

75

13

16

Cost-Benefit Analysis (of monetary costs and benefits discounted at the appropriate Discount Rate)

Present Value of Benefits ($m)

25

12

58

55

88

Present Value of Costs ($m)

45

26

16

37

36

Benefit Cost Ratio

45

23

12

67

23

Net Present Value ($m)

45

233

34

23

12

Table: Calculation of NPV for each option

In case of option 1 – If there is no specific measure undertaken then the net present value from the project is $45 million.

In case of option 2 – The net present value in case of option 2 is $233 million. The net present value of option 3 is the highest. In case of option 2, the bio diesel fuel will be available directly to the customers.

In case of option 3 – The net present value in case of option 3, the net present value is $ 34 million. The production will be higher by 20% in case of this option.

In case of option 4 – The net present value in case of option 4 is $23 million. In this option the environmental impact assessment will be conducted. The small investors will participate in the process.

In case of option 5 – The net present value in case of option 5 is $ 12 million (Needles, Powers and Crosson, 2011).   

 

[b] Shifts in the demand:

The model in the below mentioned figure depicted that demand for biodisel is perfectly elastic (horizontal) for biodiesel prices in line with the (ultra low sulfur) diesel prices. This indicates a postulation that both biodiesel are perfect substitutes of disel as well as that biodiesel is a diminutive enough part of the diesel demand, as a consequence, any changes in the biodiesel price do not influence the in general demand for diesel fuel. At the same time, it can also be noted down that any kind of adjustment in biodiesel prices in order to replicate the lower energy content of biodiesel (closely 12% lower) in comparison with petroleum diesel, did not make any impact on the overall deamand for product. On the other hand, as the low biodiesel mix naturally utilized in the contemmporary market place; it is uncertain that this inferior energy content is priced at the retail level. So, no adjustment is required here.

Figure: Shift in demand curve

 2. Analysis from the perspective of the company

[a] Discounted Present value –

The present discounted value is the future amount of money that is discounted in order to reflect the current value. The present value is less than or equal to future value because money has the potential to bear interest. This is referred d to as time value of money. The present value calculations are important to determine profit of an investment proposal (Keown, Martin and Petty, 2008). A choice can be made amongst various projects by comparison of the present value discounted at the same rate of interest or the rate of return. In the present case, the present value is important to evaluate among the various strategic options for the production of bio diesel from waste vegetable oil.

 

Option 1

Option 2

Option 3

Option 4

Option 5

Present value of Benefits

25

12

58

55

88

Present value of costs

45

26

16

37

36

Table: Discounted present value

Figure: Discounted pressent value

[b] NPV and its contributions

The net present value is a net value of the present value of cash inflows and present value of cash outflows over a specific period of time. The incoming the outgoing cash flows are also known as the benefit and the cost of cash flows. Time value of money indicates the time that has impact on the value of cash flows.  The decrease in the cash flows at the present value occurs because there is a discounting factor. With each additional period there is decline in the subsequent future cash flows. The net present value is calculated by finding the present value of the total benefits and the costs that is achieved by discounting the future value of each cash flow.

In the present case, it is important to calculate the net present value and its contributions in order to choose the best alternative. The usage of bio diesel can be made in various ways. It will enable the people to live in an environment which is free of pollution. In the present scenario it is seen that there are six choices. The net present value of each option has been calculated. It is seen that option 2 has the night NPV. The return from option 2 is 33%. In this option, the bio diesel fuel will be available directly to the customers.  Crop selection will be a major aspect of this project. The best option will be selected to reduce the losses by reducing the wastage of the resources. In this case, vegetable oil will be the best renewable source of energy.

 

[c] Supply and Demand –

The bio fuel industry in Australia is in its infancy. There are various uncertainties regarding the future development of the bio fuel industry. The price of energy as well as the preference of the consumers plays an important role. The bio diesel is used in Australia along with the agricultural supply chain. The policy makers will also make developments in this segment. Use of biodiesel is gaining importance as a result of the reduction of the adverse effects of the green house gases. The rise of the green house gas emission is a major issue concerning the world. This is increasing the demand for bio diesel fuel in Australia.

               

Figure: Comparison of greenhouse gas emissions across a range of alternative fuels against reference standards of low sulfur disel and ultra low sulfur disel

But bio diesel is expensive than diesel.  Currently bio diesel is excise free in comparison to petroleum derived diesel that has an excise of 38.143 cents per liter (Arfuels.com.au, 2015). The demand for bio diesel fuel is high. The supply of bio diesel fuel has to be increased (Abs.gov.au, 2015).

Table: Biodiesel production, consumption supply and demand

(gain.fas.usda.gov, 2013)

Conclusion

The business model has been prepared to assess the profitability of the investment. Among the various alternatives that are present with the business organization, the most profitable option will be selected. The project will be sustainable if the organization will be successful in generating profit from its investment. Production of bio diesel fuel is important in Australia to reduce the emission of the green house gases. The price of bio diesel fuel is higher than the petroleum oil. Vegetable oil waste is an important source for the production of bio diesel fuel. The various mathematical models will justify the selection the best alternative for the production of bio diesel fuel. Among the various alternatives, option 2 is considered as the best possible option for the investment decision. It will generate more than 33 % return and it is directly available to the customers. The production of bio diesel oil is an innovative approach. Vegetable oil waste can be an important resource for the production of bio diesel fuel. Large scale production of bio-diesel fuel will pollution in the country and make the environment sustainable. It is crucial to address to the various environmental issues to reduce the emission of the green house gases.

 

References

Abs.gov.au, (2015). 4655.0.55.002 -  Information Paper: Towards the Australian Environmental-Economic Accounts, 2013.

Arfuels.com.au, (2015). Biodiesel - Biodiesel Australia - Biodiesel Production - Clean and Sustainable Alternative Fuels - ARFuels - Australian Renewable Fuels Limited.

Biofuelsassociation.com.au, (2015). Biofuels Association of Australia.

Cafferky, M. (2010). Breakeven Analysis: The Definitive Guide to Cost-Volume-Profit Analysis. pp.5-30.

gain.fas.usda.gov, (2013). Global Agricultural Information Network. [online] Available at:

Keown, A., Martin, J. and Petty, J. (2008). Foundations of finance. Upper Saddle River, N.J.: Pearson Prentice Hall.

Needles, B., Powers, M. and Crosson, S. (2011). Principles of accounting. Mason, Ohio: Cengage Learning.

Schweitzer, M., Trossmann, E. and Lawson, G. (1992). Break-even analyses. Chichester [Engladn]: Wiley.                                                  

 

 

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