The Council for Scientific and Industrial Research (CSIR) used
this formula, which excludes opportunity cost, to determine
the national logistics costs for South Africa (Havenga 2010:
466–70). Profit cost was omitted from the logistics cost
calculations, as it is not a business objective of the firm
to make a profit from its logistics function. The logistics
opportunity cost was calculated by determining the logistics
costs for both road and rail transport and by multiplying the
cost differential by the firm’s weighted average cost of capital
(WACC).
An assumption was made that the logistics cost difference
for a specific year would only result in an opportunity cost
during the following year. The following future value (FV)
formula was used to determine the opportunity costs for
each year’s logistics cost differential (Du Toit, Erasmus,
Kotzé, Ngwenya, Thomas & Viviers 2010:98):
The Council for Scientific and Industrial Research (CSIR) used
this formula, which excludes opportunity cost, to determine
the national logistics costs for South Africa (Havenga 2010:
466–70). Profit cost was omitted from the logistics cost
calculations, as it is not a business objective of the firm
to make a profit from its logistics function. The logistics
opportunity cost was calculated by determining the logistics
costs for both road and rail transport and by multiplying the
cost differential by the firm’s weighted average cost of capital
(WACC).
An assumption was made that the logistics cost difference
for a specific year would only result in an opportunity cost
during the following year. The following future value (FV)
formula was used to determine the opportunity costs for
each year’s logistics cost differential (Du Toit, Erasmus,
Kotzé, Ngwenya, Thomas & Viviers 2010:98):
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