Indicators of efficiency and economic feasibility in two irrigatedfarms located in the Linares area (35º51' S. lat. and 71º35'W. long.), Maule Region, Chile, were estimated. The farms areassociated to PROLECHE S.A., an enterprise formed with financialsupport of the Development Corporation of Production (CORFO) forassociative administration. For economic evaluation the discount ratewas estimated based on Capital Asset Pricing Model (CAPM) and theWeighted Average Cost of Capital (WACC). Economic feasibility wasassessed by mean traditional indicators: namely Net Present Value(VAN), Internal Rate of Return (TIR), Net Present Value Index (IVAN)and Investment Recovery Period (PRI). Productivity per cow-in-milkreached values from 5,141 to 7,355 liters, at the same time theproductivity per hectare varied from 9,122 to 8,528 L, for cases 1 and2, respectively. Profitability measured on total capital investment formilk production varied from 10% (Case 1) to 8.7% (Case 2). Gross marginper cow (in Chilean pesos of March 2000) was $ 279,963 and $ 207,653,while the profit per hectare was $ 337,653 and $ 237,042, for cases 1and 2, respectively. The TIR reached values from 11.5 to 14.8% for case1 and 14.6 to 20% for case 2. Considering that VAN is positive and theTIR is higher than the discount rate for all milk pricing scenarios,the main conclusion is that milk production is economically feasible inthe two cases for the existing scale of production.
