investment Social entrepreneurs want more than a quick hit they want to create

Investment social entrepreneurs want more than a

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investment . Social entrepreneurs want more than a quick hit; they want to create lasting improvements. They think about sustaining the impact .” -- Prof. Greg Dees, Founder Centre for the Advancement of Social Entrepreneurship Duke University Source: "The Meaning of Social Entrepreneurship," J. Gregory Dees, 1998, rev 2001 "The Meaning of Social Entrepreneurship". CASE at Duke.
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L06 Slide 52 1.3 billion with no electricity 77 billion litres fuel / year $38 billion / year / / The Problem
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L06 Slide 53 Solution? /
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L06 Slide 54
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February 15 & 25, 2019 L06 Part 3: Economic Analysis
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L06 Slide 56 Economic Analysis Important aspect when considering any engineering project Strengths: - Easy for direct comparison - Quantitative Challenges: - Uncertainty - Need to assign $$ value to everything For your class project: Considering only economics, which alternative is the best option for your client?
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L06 Slide 57 Learning Objectives 1. Use cash flow diagrams to graphically express finances 2. Understand the fundamentals of the time value of money Present value, future value, interest, etc. 3. Compare the life cycle costs and benefits between two alternatives
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L06 Slide 58 Cash Flow Diagram Way to graphically represent multiple money streams and the timing in a clear and concise manner $100 Cash coming in $100 Cash going out
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L06 Slide 59 Types of Cash Flow Initial / Purchase / Capital costs Annual / periodic maintenance Operational costs or savings Replacement costs Salvage value or disposal costs
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L06 Slide 60 Cash Flow Diagram Draws boundaries between internal and external costs Clarifies the viewpoint Cash flows (beside initial cost), always happen at the end of time period year salvage value 0 1 2 3 4 5 annual maintenance initial cost replacement cost operational savings Summarizes all cash flow information
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L06 Slide 61 Time Value of Money Interest: Growth in the value of money over time Simple Interest vs. Compound Interest Simple Interest: F = P ( 1 + i x N ) - Interest is only paid on the principle Compound Interest: F = P ( 1+i ) N F Future value P Present value i Interest rate N Number of interest periods
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L06 Slide 62 Present Value Example : $100 invested for 2 years at 10% interest compounded annually Year 1 $100(1 + 0.1) = $110 Year 2 $100(1 + 0.1)(1 + 0.1) = $121 𝑃 𝐹 = 1 1 + 𝑖 𝑁 Defined at the end of year N Defined in the beginning of year 1 Present value factor Single future payment
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L06 Slide 63
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