Net present value analysis is used to derive the marginal bid price for a beef herd sire from after-tax net revenues and cash flow influenced by genetic improvements. Marginal bid price represents the additional amount a producer could pay, above the present value of the current beef herd sire, for a sire expected to exhibit superior performance as reflected by increased average weaning weights of offspring.
An analysis of the profitability of purchasing a breeding bull for a commercial beef cow herd is presented as an application. Several alternative scenarios illustrate the impact of selected determinants on the marginal bid price of a bull.
