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Abstract
Capital budgeting procedures using the concepts of annualized net private, net public, and net social values, and using a dynamic-stochastic simulation approach are employed to determine the economic feasibility of sediment control basins in Northeastern Nebraska. The study, using the Swamy random coefficient regression model, fits a polynomial, and a Mitscherlich-Spillman (M-S) yield-topsoil thickness response function and based on agronomic principles, the M-S function is chosen for the analysis. The results of the study show that the basins are economically feasible when they are compared against grassed waterways, but are not feasible when they are compared against conventional tillage methods such as farming under a scenario of no basins and no grassed waterways. In addition, the study has shown that the value of the basins do get capitalized into land prices, even though the magnitude of this capitalization has not been shown to be highly significant. The riskiness of the investments is accounted for by using risk-adjusted discount rates and by using sensitivity analysis on the cash outlays, cash inflows, cash outflows, discount rates, initial topsoil thickness, and rates of technical progress. Sensitivity analysis is also used as a way of determining the robustness of the initial solutions.
