Applied international macroeconomics projet between 1956 1986 Essay

Applied international macroeconomics projet between 1956 1986 - Essay Example Tunisia, officially known as the Tunisian Republic, is a country situated on the Mediterranean coast of North Africa, bordering with Algeria to the west and Libya to the southeast. Tunisia got its independence from the French colonialism in March 20, 1956 and Habib Bourguib became the president of new state. He established a strict one-party political system with a strong hold on economy and state resources and their allocation. One of Tunisia’s outstanding characteristics is its remarkable economic development, sustained over many decades and currently driven by a process of market liberalization and integration into world markets (Country Cooperation Strategy for WHO and Tunisia 2005–2009, 2006, p. 7).Historically, Tunisian economy has gone through fluctuating periods of growth and instability. Its has gone through a transition period of a centrally planned to a more privately managed economy and stabilization and later as a structural reform programs.The purpose of f ollowing paper is to briefly highlight the important aspects of Tunisian economy during1956 to 1986 period. The paper discusses important economical during this era by splitting it into two sub-periods; namely;- Transition period of a centrally planned to a more privately managed economy and the stabilization (1956- 1970), and - An era of structural reform programs (1971- 1986).Tunisia, officially known as the Tunisian Republic, is situated on the Mediterranean coast of North Africa, bordering with Algeria to the west and Libya to the southeast. ... crisis and instability. Its has gone through a transition periods of a centrally planned economy to a more privately managed economy and the stabilization (since 1956 to 1970) , and structural reform programs 1986-87. W can divide this entire period of economic developments into two sub- periods namely; - Transition period of a centrally planned to a more privately managed economy and the stabilization (1956- 1970), and - An era of structural reform programs (1971- 1986). Transition Period of a Centrally Planned to a more Privately Managed Economy and the Stabilization ;1956- 1970. At the time of independence in 1956, Tunisia was facing a crippling economic position mainly because of the huge transfer of money abroad by the wealthy Europeans, who had left the country. Yet the country and its leadership were quite optimistic and had strong determination in their potential and progress. They set their targets mainly focusing on education, modernization agriculture and infrastructure and industrialization and heavily invested in these sectors. Although these were fine priorities, yet unfortunately in sixties, they could not reap enough of the benefits to the masses because of their long term investment requirements and strict government policy control over theses sectors. During this period per capita income could not increase with an increase in investment. Government strict policy control over economy resulted a rapid increase of money supply and aggregate demands. These factors considerable increased the inflation rate and above all raised foreign payment imbalance. More than 70% of investment was public. More than half of total investment was based on

NPV and IRR Capital Budgeting Tools Assignment Example | Topics and Well Written Essays - 1500 words

NPV and IRR Capital Budgeting Tools - Assignment Example Budget in the context of capital budgeting is the plan that describes in detail inflows and outflows of revenue and expenses during the project life. The project life for this case is 10 years. Budget will show the company detail plan of cash inflows and outflows during the 10-year operation period of the aircraft. The two words together – capital budget indicates a list of planned long-term investment outlays for projects. In this case, planned investment is to purchase one of two aircrafts and make additional profits from its operation. Capital budgeting is the method used to determine which among long-term capital investment should be chosen. In this case, we are determining one project – purchase of an aircraft. However, we are using two different aircrafts. For simplicity, two different aircrafts are considered as two separate projects. Capital budgeting process helps strategic planning committee pick up the option, which gives higher rate of return considering tim e value factor of money. This is why it is important in strategic management. Without capital budgeting strategic management team will enter into a wrong selection. Question 2. Explain why the NPV and IRR capital budgeting tools are superior to the accounting rate of return and simple payback techniques for determining the attractiveness of capital investment opportunities.   Answer. ...This method has two limitations. It does not consider cash inflows for the project beyond payback year, and time value of money. Example: Given below cash flows of two different projects for the same return rate, k = 10 %. Project Investment Cash flow Yr 1 Cash flow Yr 2 A $10,000 $0 $14,500 B $10,000 $ 10,000 $ 2,500 Payback method will select project B, since it pays of in one year. Net present value (NPV) The concept of NPV is included in the following formula, NPV = - Initial Investment + Sum of present value of all cash flows until the end of the project. The basis of this method is in evaluat ion of time value of future money. NPV measures the additional market value that is created or destroyed as a result of implementation of investment. Example Given below cash flows of two different projects for the same return rate, k = 10 % Project Investment Cash flow Yr 1 Cash flow Yr 2 A $10,000 $0 $14,500 B $10,000 $ 10,000 $ 2,500 NPV A = - 10,000 + 0 + 12,000 / (1+0.1) 2 = - 10,000 + 14,500 / 1.21 = - 10,000 + 11,983 = 1,983 NPV B = - 10,000 + 10,000 / (1+0.1) 1 + 2,500 / (1+0.1) 2 = - 10,000 + 9,090 + 2,066 = 1,156 According to NPV selection method both projects have NPV > 0, but project â€Å"A† has higher value. With Payback method project â€Å"B† was selected, with NPV method project â€Å"A† is selected. Two-year cash flow calculation in NPV method shows that project â€Å"A† would maximize the investment. This cannot be said about Payback method. Accounting rate of return This method ignores time value of money.