In article <[log in to unmask]
n.ab.ca>, Peter Wilson <[log in to unmask]> writes
>An article in BEE BIZ , a relatively new magazine "for the commercial
>beekeeper" August 1995, by Jean-Pierre Chapleau, St Adrien, Quebec
>entitled " PLASTIC FRAMES-GADGETS OR TECHNOLOGY?" concludes with a 12 year
>cost of production analysis using wood/beeswax foundation; plastic frames
>and wood/plastic.
>
>Figures given are $4.08; $1.83 and $1.99 respectively.
>
>Peter Wilson
>Edmonton, Alberta,
>Canada
>
>                                     email: [log in to unmask]
 
I do not believe that this was intended as a serious project appraisal
but simply to illustrate that Mr. Chapleau believed that the Pierco
frames worked out cheaper than either of the other options in the longer
term.
 
For example, the article assumes :-
 
1)      0% inflation over 12 years.
2)      that there is no cost of capital (i.e. that you can finance the
        project without borrowing or expecting a return from the
        investment).
3)      that there is no opportunity cost from the decision to invest in
        a more expensive option in year 0 (which ties up working
        capital) as opposed to a cheaper option that requires
        replacement at some point during the project but frees up
        capital for other projects.
 
You have to ask yourself, are these assumptions reasonable? I suggest
that they are not.
--
Paul Walton, MBA
Email   : [log in to unmask]
Toddington, Bedfordshire, England.