Accession Number : ADA293641

Title :   Present Value Analysis in the Government.

Corporate Author : AIR UNIV MAXWELL AFB AL

Personal Author(s) : Snow, Richard A.

PDF Url : ADA293641

Report Date : 05 FEB 1995

Pagination or Media Count : 28

Abstract : The contention of this paper is that the Government does not invest in long term financial markets (interest bearing accounts). Financial decisions to spend money on one project rather than another are motivated by the total cash outlays of the project, the projected savings, or upon the benefits to be accrued from the project. Investment in an interest bearing financial instrument for future expenditures is not considered an acceptable consideration. An opportunity loss from financial markets should not be a major part of the decision making process as it is not a real financial risk to the Government. Traditionally, economic or financial analyses have placed too much emphasis on discounted cash flows in the decision making process. Often inflation, borrowing rates, and other real or actual cash outlay risks are ignored or the importance is minimized. The present value discussion does not apply to Non Appropriated Fund(NAF) organizations and other real business functions or operations within the Government. When a realistic opportunity for investment is available present value analysis becomes a relevant financial tool. Total cash flows of a project in current dollars should be the basis for most economic decisions within the Government. (RWJ)

Descriptors :   *UNITED STATES GOVERNMENT, *FINANCIAL MANAGEMENT, *COST ANALYSIS, ECONOMIC ANALYSIS, COMMERCE, MARKETING, RISK, DECISION MAKING, INVESTMENTS, ACCOUNTING, ECONOMICS, FORECASTING, PUBLIC ADMINISTRATION, SAVINGS, FINANCE, MONEY, INFLATION(ECONOMICS).

Subject Categories : Economics and Cost Analysis
      Government and Political Science
      Administration and Management

Distribution Statement : APPROVED FOR PUBLIC RELEASE