And without further ado, we'll bring on our next speaker. Alex Perlman is a bio... Ethicist. Ethicist? Wow, that's a tongue twister in the morning. And writer and the incumbent managing director of the Institute for Ethics of Emerging Technologies. Her research focuses on biohacking, self-experimentation, and access to health technologies. She also writes about emerging policy issues in science for the mainstream press. Ladies and gentlemen, Alex. Thank you. This is super exciting. So thank you guys for coming out this early. I'm a little bit bleary-eyed. Apologize in advance if I'm yawning. We had a fun time last night. So like Hunter said, I'm Alex. I focus on regulatory issues in science, specifically ethics of health technology, distributive justice, and I'm a journalist, a bioethicist, and you can find me on Twitter. So yesterday we had a really cool talk about open APS, the artificial pancreas, by Jay Legoria, which was amazing, and if you didn't catch it, you should definitely find some video or go find him and talk to him. And that was basically showing a community of people who have come together with a shared medical problem in ways that they can work together to save themselves. And that's just like a really incredible story about hardware and groups and biohacking. And we've also had a lot of conflicting labels and questions about what we call these communities. Is it citizen science? Is it community bio? Is it biohacking? Is it DIY bio? For the purposes of this, I'm just going to refer to everything as biohacking. And we can just leave it at that. It's just easier. And so to preface this talk, I just want to say that I really believe in this space. I believe that biohacking in medical devices, pharmaceuticals, and basically any kind of health technologies could be leveraged for major gains in public health. But obviously there are major safety issues. There are major legal issues. There are major ethical issues. And so for safety, we don't need to flog that, right? We all know that that's like a big part of this component. And I'm not going to be speaking about safety in this talk. So I just want to be clear that that is an issue and I'm not advocating for anyone to go out and use these technologies. So let's just be clear about that. What I am talking about though is the prohibitive cost of pharmaceuticals and that this is a life and death issue for many Americans. It's not all of us at some point in our lives. All of us could potentially have a debilitating medical emergency that could bankrupt us. So in this talk, I'm going to present two case studies of groups that have used biohacking methods to increase access to some of the most expensive pharmaceuticals in the country. I'm going to explain the methods and motivations of these groups. And I hope to really focus on the questions that their actions raise about the crisis of distributive justice in our healthcare system and the lack of means of effective delivery of pharmaceuticals to patients. And my question really is to investigate whether these biohackers are actually behaving and acting in a way that is morally and ethically acceptable given the circumstances. So basically this is where we are now, right? This is the result of the system as it's set up. Prices are out of control. People cannot afford or access their medication. Patients are enraged if not actively harmed and often dying. And a lot of this is because of bad regulation or a lack of regulation in some cases. And so it's not surprising to me nor should it be surprising to you, and I doubt that it is, that biohackers have sort of taken this situation and made like very, very cool lemonade. I would argue that this system and this situation has created an inability for people to access medicines in a legal way. And so going around established regulations is not new. And both of the projects that I'm going to talk about have forebears in sort of like legally challenging examples in past decades, but we're going to get to that in a bit. So that's what we have in the legal side. And then on biohacking side, I'm going to talk about two different kinds of hacks. So one is making something new from things that already exist, off-the-shelf parts that already exist, put them together and make something new. And then the second thing is undercutting the existing system or the infrastructure that exists with a more efficient way to get from point A to point B and then also adding in things like transparency, open source methods, data sharing and sort of the ethos of putting people and patients over profits. So the first project I'm going to talk about is Open Insulin. So many of you might have heard of this project. There's been a ton of press recently. For those of you who don't know what this is, Open Insulin is an experiment that was organized by Anthony DeFranco, who is a diabetic. He has type 1 insulin. And the project's aims is to create pro-insulin from yeast based on the early work of Eli Lilly, a patent that has since expired. And the project has grown from just a few people in Oakland, California to now sort of a global movement all over the place where there are biohackers contributing all manner of things to this project including legal advice, communications help, all that kind of thing. The patents have expired but there are no competing generics on the market for insulin that are readily accessible for everyone and also crucially that work for everyone. So here are some facts about insulin in America. None of this should be surprising to anyone in this room. This has been in the media a lot recently, but it is still worth looking at these numbers and being shocked. Like, this is really, really bad. 1.2 million Americans have type 1 diabetes and the annual cost of insulin has doubled in the past five years, tripled in the past 15. And the founder of Open Insulin once paid $2,400 out-of-pocket for a one-month supply of insulin. We see these crowdfunding initiatives, people going to ERs purposefully to get insulin, putting themselves into incredibly risky situations just so they could get into an ER so that they can get free insulin. And we've seen quite a few deaths from insulin rationing recently. These are the three companies that own the patents. They own and make 90% of the world's insulin and they face price-fixing allegations and an investigation by the Department of Justice. This is a chart of the way that the prices have gone up together in lockstep and while a racketeering charge was recently thrown out, I think it's easy to consider the insulin market a racket. The prices in the U.S. are also way higher than elsewhere and this is mostly because of a lack of government regulation. And Jay yesterday in his talk about the artificial pancreas had this amazing slide that I couldn't find this morning. I didn't have time to find it, but definitely he showed a chart of insulin pricing compared to other goods and how it had gone up in lockstep with markets, food, housing, et cetera. Insulin is just off the charts expensive. So this is also a cool slide. For the pharma companies, their argument about price increases is the cost of innovation, right? That's what we always hear. R&D is expensive, that's why we need to raise prices. Higher prices, higher drugs, more research, right? So my colleague at Harvard Medical School, Spencer Hay, made this very, very cool tool called, sorry, the Aero Data Lab, which I will put a link, you can circulate a link on Twitter. He scrapes all the data from clinicaltrials.gov and he'll show you the trial for any disease, the company that made it, the size of the trial and so on. So what we're looking at here is time and the bubbles are the size of the trial. Green is completed, red is halted and then these are the, and I think blue is ongoing and then these are the companies and so this is basically showing that 20 years of R&D, incredibly like expensive, ongoing R&D, but there hasn't been a ton of change. There hasn't been major changes in the insulin market or helping patients, right? So why, it's amazing to me that this is the case and that we're seeing these incredible innovations coming from a bunch of hackers and communities coming together when the resources that these companies have that have been deployed have not managed to make those kinds of increases in innovation that just a few hackers have done in just a couple of years, right? So this is the goals of the Open Insulin project. The idea behind the collective is to manufacture insulin and distribute it for a fraction of what it costs. There are 11 other biosimilars in the world, none of which are approved by the FDA, so that's also a problem and that's probably what's next. But in the meantime, this is a group that wants to produce and distribute biosimilars locally. And then you start to think about how this could be useful and it's not just for individual use and not just for community use but also for the uninsured, for health systems like the VA where people are not able to access community health clinics and that sort of thing. Open Insulin could really be a lifesaver for a lot of people. Obviously, however, there are significant issues with the idea. Patent infringement accusations, potential, it's questionable about whether the work that Open Insulin is doing is actually infringing on a patent. They may not be and recent advice that I've heard is that they aren't infringing on the patent but that would never stop any big company from going after them and wasting a lot of money on that. They're definitely adjacent to existing patents so if anyone has a legal background or wants to help, they're looking for that and that's where they are now. So the second organization that I'm going to talk about is For Thieves. So I know that there has been presentations by members of this collective at this conference in years past specifically about the EpiPencil. So I'm going to just do a really quick EpiPencil dive because I think a lot of people are familiar with that but if not, this is some numbers about EpiPens. The real problem with EpiPens, is that not only are they expensive and like crazy overpriced compared to what they cost to manufacture, then they expire. And especially for people who have young children with allergies, you have to buy multiple ones and then you have to keep buying multiple ones because there's got to be one at home, there's got to be one in your purse, there's got to be one at the kids' school because now school districts are so strapped they can't afford them. You want to make sure there's one in the classroom so you have to keep shelling out $600 for these EpiPens and that's just a two-pack. What if you need four, right? And so my colleague Nicholson made this really good point that if you are the monopoly holder on this medication, on this device, why would you change it? It's genius, right? It's genius. There aren't a ton of other auto-injectors on the market that people like. They keep getting removed from the market. I have that slide up next. But if you are the person who has this, has a monopoly on this product, why would you change it if you're the company? So the other thing is, it's really difficult to make auto-injectors. In August of last year, the FDA approved one. It had rejected an earlier application and a new one is coming to the market from Tiva. In 2015, Sanofi recalled one. Another one, AdrenaClick. People hate it. It's really difficult to use whereas the traditional EpiPen is much easier and slicker. And Pfizer, which actually manufactures EpiPen, regularly recalls them and issues like minor fixes and bug fixes. So it's difficult to make one that works anyway. And so when we talk about safety issues with the EpiPen, we have to remember that the ones on the market that are approved also have been proven to not be as safe as we think they are. So this is a picture of Michael Laffer, who is one of the members of ForthBees who manufactured this. EpiPen and the instructions for it are online. It's basically a auto-injector that you can use for insulin. So diabetes patients can use an auto-injector and buy it online for $30.  So the thing is though that this is not a long-term solution, right? This is like a great hack. This is a really cool thing that people could probably, you know, save lives. But it's not going to be something that everyone can use. It's a stock gap. And it's probably going to be one of those things that until there's something better, like this is what you can use. But Michael said something to me that really stuck in my brain. When I asked him if he knew if anyone had actually successfully used the EpiPencil and if there were any reported uses that he knew of, he said that he doesn't want to know if anyone has tried it because he hopes that they don't need to. He wants to keep pushing for people to be able to access EpiPens in a way that is in line with what it's supposed to be because this is a difficult thing to make. You could injure yourself. And it's not a long-term solution. So these are some statistics about abortion pills. Abortion as and specifically medical abortions are increasingly under attack by regulations across the United States. It's becoming increasingly more difficult in a number of places for women to access any kinds of abortion, let alone increasingly safe and secure ones by getting pills. Miphaprishtone and misoprostil are often unavailable, but you can buy them on the Internet. And if anyone saw there was a recent New York Times article about being able to procure abortions online by buying pills from sellers. And it's okay. This is one of the safest medical procedures that has been approved in this country. It is like a known safe thing that the FDA has had approved for decades. The problem is the restrictions that the FDA puts on how to get them. So you can buy them online, but that's illegal. You could get them from a biohacker. You could make them yourself. Those things are illegal because you are actually only allowed to get medical abortions from clinics and doctors. You can't even get them over the counter. And if you live in a restrictive state, that's impossible. So this is a picture of Michael Laffer throwing abortion pills at people at Body Hacks a couple years ago. And like I said, again, this is not a long-term solution. Ordering them online, making them yourself, it's not a long-term solution. We need to change the regulations and that's up to the FDA to make abortions more accessible to everyone in this country. And so that brings me to when we talk about not a long-term solution, we're talking about things like harm reduction. So doctors take an oath of do no harm. Well, I am not a doctor and none of the people that I have mentioned in this talk are doctors. And we live in a world where social and systemic forces do a lot of harm. And I argue that an ethical approach to the public health crisis that we're facing of overpriced and inaccessible pharmaceuticals is the only answer is to look through solutions through the lens of harm reduction tactics. So harm reduction, in case anyone is unaware, is... It can be used across the healthcare context, but it originally comes from the opioid crisis and responses to the opioid crisis. And harm reduction strategies include things like safe injection sites, access to needle exchange programs and that kind of thing. But we can also use put harm reduction in a healthcare context because when you start to apply different kinds of health issues to harm reduction lens, you can see that it's not about do no harm, it's about doing less harm. It's about finding ways where people can survive. There is a life and death situation, and if it's between black and white, getting a little bit in the gray is a life-saving answer. So I put this one. Okay, so this is an interesting comparison that I found about Buyer's Clubs from 1992. This is a description of the Dallas Buyer's Club, which was a very famous movie with Matthew McConaughey, but also was a situation in which people who were HIV positive or had AIDS were smuggling unapproved and untested HIV antiretrovirals into the country. They were then testing them for purity and distributing them to folks who couldn't take the risk to go overseas or import them. They were then distributing them to their communities. And the accusation was that the government was not acting fast enough. The pharmaceutical companies were price gouging patients, and so people took the situation into their own hands. And then you look on the other side, you look at a recent article about insulin and see that the language is exactly the same. The accusations are exactly the same. And then we can also see that people are still using these same tactics. There are Buyer's Clubs for insulin on Facebook. People are going to Canada to get their kids the insulin that they need crossing the border. These are legal tactics. This is not acceptable by the FDA. This is illegal. And imagine if folks who were bartering for insulin on Facebook could make it themselves and distribute it to their neighbors in a way that was safe and effective and tested. These methods of procurement are all legally questionable, but they may not be ethically questionable. And again, it's the FDA's REMS program that blocks access, making abortion pills accessible only through pills or hospitals from your doctor. They're overwhelmingly been considered safe. And the last time I checked on the Guttmacher Institute, there have been at least 21 arrests of women who have been using pills that are FDA approved and considered safe on themselves. And instead of actually changing their regulations, the FDA is now going after the websites that are selling these pills to the people who can't access them. And the accusation against the EpiPencil, of course, is, well, you could get an infection. You could get an abscess at the injection site. You might really hurt yourself. It's really difficult to overdose on epinephrine.  No, it's not harmless. Yeah, you could really hurt yourself. But that's not death. So these are some of my thoughts. Is it ethical to continue to enforce the patents that are decades old? That's a question that, to me, is a really interesting one. How invested are these companies in patents that they're not changing, they're not updating and people are dying? Is it something that the government should consider? And then by considering the emergence of biohacking solutions as harm reduction, does that then push the issue? Does that make it easier to find legal compromise that still benefits patients? And then, of course, like I've said throughout, safety and efficacy are major concerns, but I think that we have to consider how to balance safety with justice. And that's something that I feel that our medical system just does not do a good job of. And if you look at other medical systems in other countries, there is this balance between safety, cost, and justice, and that these things work together in a way that is just not functioning properly in our country. And the last thing that I think is probably the most important is that the actual cost for any of these examples to go legit is so prohibitive. It is impossible for a startup pharmaceutical company to compete in this space. It is so expensive to come out of the labs and even if you want to help people and even if you're doing this right, all the way through, do a check all the boxes, it's impossible to get that much money to take on these pharmaceuticals with the hacker ethos and staying true to patients' over-profits. It becomes an almost impossible burden. And I think that is one of the most important things to take into consideration. So here are some sources. I used a lot of information in this. If anyone is interested in more, I have plenty. You can find me after. And then I'll just end with this. And again, one of the things that I have always found is that, you know, just because what's legal is what's easy is never, almost never in the healthcare context what is right. And when I've been examining this as an ethicist and as a journalist, I have found that the law almost never is in lockstep with what people need and what is right for them to survive. So I'm just going to leave it there and we'll open it up for some questions and conversation. Thank you. Hmm? Yeah? Okay, we got 10 minutes for questions. Any questions? Yeah. So what does the average penalty look like for someone when you said earlier, like 21 women have been... Can you start again? Sorry. So earlier you said there was like 21 women who have actually been charged with... Arrested. Arrested. Okay, what does the average penalty look like for that? What kind of charges are they trying to bring against? Yeah, it depends on the state and I would have to look more deeply into what that actually, if anything, actually came of those arrests. I'm not sure. I would have to look that up, but I would imagine that it would be a fine, you know. Yeah. If there's anyone in his room who knows the answer to that, please don't hesitate to shout it out. Any other questions? If there's a question? Hey, great talk. I was wondering, you know, when it comes to discovering new molecules or, you know, finding a new target and finding something in the market that could actually, you know, impact a patient population, it's super expensive, right? And you kind of touch on that at the end. So is there any kind of, you know, thoughts? It'd be great to hear your thoughts as far as, you know, how we can try and optimize the process and make it, you know, affordable, but also like, you know, allow for the R&D expenditures to be put in place to get to the point where we can bring something into market and then be able to hack it. You know what I'm saying? Yeah, I mean, that's one of the most important things, I said, that is the barrier to entry for really any kind of innovation that's not an establishment pharmaceutical company or even a research institution. So I mean, yes, let's hack the system. I do not have a silver bullet to that question. I think that the more that foundations are encouraged to work with innovators and bio-hackers who are working outside the box, outside the lines, is that's happening more and more? I mean, I think that there's an avenue for funding. I think that obviously crowd sourcing is a big alternative for how to get extra funds. It's never going to be enough, but I think ultimately, you know, there needs to be a shift in how we perceive this, the cost just in general of bringing a drug to market and why it's so expensive and whether that's marketing, right? So one of the, a lot of the expenses that pharmaceuticals put on these price tags is just basically they want to put ads on television and they want to well-produce ads. They want to put them in magazines. They want to buy doctors with pens and, you know, come to their offices and give them pens and free trials. I mean, that whole area is also, I think, right for some regulatory oversight and we're seeing that more and more. We're seeing these conversations about why are the prices so high? Congress is working on it. But again, like it's so many factors that I don't know if there's one silver bullet. It is. That's the thing. It's like just to like do just to get from point A to point B of discovery is super expensive, right? And there's just not enough resources available for that at all. Yeah, I agree. I don't know. Do you have any comments on medicine today in terms of cures versus ongoing subscription medicine? I don't know. I'm not sure that I understand what you mean by cures versus subscription medicine. Just in terms of companies that instead of actually finding cures for things, would rather come up with a solution that you can continue to pay on for the rest of your life. This is a medicine that will there's no cure for this, but oh by the way here's this expensive medicine that you can pay for until you're passed away. Absolutely. And I think that's one of the things that we'll find. I mean the data that I showed from clinicaltrials.gov is a lot of insulin trials. But not a lot of like let's find a cure. It's like let's find a better insulin. Right. So yes, I think that that is a huge problem. And I think that our example of that right now is gene therapies that are a one-time shot potentially could do an amazing cure or put into a remission a disease for 10, 20 years you get one shot costs three million dollars. These are the price tags of these gene therapies right now and there's one some have been taken off the market because insurers won't pay for them even though they are approved and are safe and maybe even effective they get taken off the market because insurers won't pay for them right and then the drug companies just you know will remove them from the market. So yeah I think that is a huge problem and we're going to be seeing more and more of that as more and more gene therapies are developed this is going to continue to be a debate for sure. I was wondering about some of your thoughts on the most ethical ways to do patents if I recall correctly the guy that came up with the polio vaccine he's going to charge for it are there ways to kind of do if you discover something but don't want a competing company to patent that and then gouge everyone if you can patent it but have it in a way so that you're not gouging everyone so just do it ethically. Well I think so I don't know if everyone heard that question it's just about ethical patents yeah you can do protective patents and then I'll just open it up to the free you know create like a comments I think that's the best way if you want to protect your IP like yeah have a patent give it away for free to the people who want to use it and don't want to you know charge an arm and a leg for it I think there are some probably some people in this room who have good ideas about how to protect IP while still sort of making hardware and technology accessible to people who need it in an affordable way and certainly I'm sure that there is an ethical way to find a balance we just aren't seeing it right now last question thank you for your talk so the when you brought up about the abortion medication specifically with respect to the kind of the policy at the FDA that you're referring to what would be the thing that needs to change on their end to better enable the landscape is kind of one question the second one even with that policy change would that really improve access in states where they'll still make it illegal okay great question so the first question is the FDA has a policy called RMS which restricts access so to remove a medication from underneath that policy they just need to like say that that now this medication is now going to be available over the counter and so yes it's fairly easy I mean it's not that easy it's involved they have to go through a process but this is a medication that should not be under that restrictive policy and they can change that so the second answer to your question is yes if if abortion medication were available from pharmacies or that you could order them online through like a telemedicine situation which is something that's being done increasingly yes it opens up access because right now if you have to go in some states we have to go to an abortion clinic to get an abortion medication and there are no clinics in your state you can't get it so then to be able to go to your local pharmacy where undoubtedly we're going to see things like we're seeing already with plan B where a pharmacist gets on a political high horse and is like I don't believe in plan B medication yes we're going to see that that happens it's terrible and those people should not be in their jobs but it will definitely increase access overall if those kinds of pills are more widely available and not just you know from a doctor or clinic if you could go to any CVS and be like yes please I'm four weeks pregnant I need the combo abortion medical abortion that would be amazing and safe the other thing is about safety so great thank you everyone for listening applause


At Kuleski, we're sustainable across all aspects of the business. I guess fundamentally it starts off in the vineyard. So we've been certified organic and biodynamic since 1998 on the property here. So what that means is by fundamentally not using any chemicals in the vineyards, no chemicals. Pesticides, herbicides, fertilisers, things like that. It's all about getting the health of the soil in balance. So promoting good fungi, bacteria, earthworms and so forth. We're getting quite a few people that are really interested to come out to the farm, have a look around. Of course we're talking through the winemaking process, which is relatively straightforward and traditional. But we like to show them the compost heap, get them to weather permitting, touch and feel.  So I think people can then really understand the basics and what we're trying to do there in getting the soil healthy and balanced. So we're talking through that, walking through the winery. And then of course we have also got a solar system, so it's self-sufficient for power. And we've got quite a large catchment from the point of view of rainwater. So self-sufficient for water as well. For the actual wine point of view I think it means it makes potentially better quality wine and more authentic wine, which really represents the time and the place where it's growing. So I guess wine is all about where it's growing, the soil. And by growing it nice and naturally organically, by dynamically, I think you get the best expression of that soil. So then that the characters come through in the wine. It's really showing our Kaleski winery, our Kaleski wine, as opposed to just a generic wine from wherever, which I think using conventional methods can dilute the authenticity of that wine. You look at the food side of things and a lot of people are eating organically or eating foods with no preservatives, less preservatives. So people are becoming much more aware of how their choices affect their health and affect the environment. So we're seeing that from a wine point of view as well.


Financial analysts use various quantitative techniques to determine the financial worth of a project in terms of its liquidity and solvency. Both discounted cash flow based models and undiscounted cash flow based models are used in this process. Generally, undiscounted cash flow models are used to determine solvency of the project whereas the discounted cash flow models are used to determine the project's profitability. In this list, the first model is the payback period. Payback period tells us the time that is required to recover back the project investment. This model is based on cash flows and the model is very much easy to understand and use in determining the payback time period. This payback model is the indicator of a project liquidity. It has a certain criteria to accept and reject the proposal of a project. If the calculated payback period is less than the required payback period, then the project can be accepted. Whereas if the computed payback period is greater than the required payback period, the project may not be accepted. But if we have equal cash inflows like in the form of an annuity, then how can we determine the payback period? Let us assume we have a cash investment of Rs 60,000 and annual cash inflow of Rs 15,000. Then the payback period can simply be computed by dividing the investment over the annual inflows. So dividing Rs 60,000 over Rs 15,000, the answer comes to four. This means that the payback period on this project is the period of four years. But if we have uneven cash inflows, then how payback period can be determined? Let us assume we have an initial investment on a machine of Rs 6,000 and for a period of five years we have uneven cash flows like 3,000, 1,000, 2,500, 1,500 in the last year. Then how can we determine the payback period on this project? We need to determine cumulative cash inflows. These cumulative cash inflows when equal to the initial cash outflow, that will be the project's payback period. Let go for it. In the first year, we have annual cash inflow of 3,000, but we need a recovery of 6,000. So we have to enter into the second year. But in the second year, the cash inflow is Rs 1,000. Now we have after two years, accumulative cash flows of 4,000. We need more, an amount of Rs 2,000 to have a recovery of 6,000 in full. But in the year three, the cash inflows are 2,500. So we are not required to work for the whole year. We have to work during the fraction of the year to determine that fraction. We divide the required amount of Rs 2,000 over the annual cash inflow of 2,500. The resulting figure is 0.8. Now we add this 0.8 to the initial two years. The resulting figure is 2.8 years. So this means that we need 2.8 years on this project to recover its initial cash investment of Rs 6,000. There are certain drawbacks associated with this simplest technique. The first is that the payback period measures the profit, measures the liquidity of the project and not the profitability. Then it ignores three important factors. It ignores time value of money, project risk factor and cash flows beyond the payback period. In the recent example, we have seen that we just needed Rs 2,000 to break even our investment of Rs 6,000 whereas in the third year, the cash flows are 2,500. But the payback method considers only first Rs 2,000 in the 80% period of the third year. For the rest of the period, there is an earning of Rs 500 but the payback period did not consider that extra amount. Then this method is unable to distinguish between profitable and unprofitable investment because this payback period method does not consider profitability. Like net present value and IRR, there is no economic criteria embedded in this technique so it has no economic rule to determine the acceptance and rejection of any given project. Then it is recommended that besides assessing the liquidity of a project through payback period, the profitability of the project should also be measured and determined and accessed through other techniques like IRR and NPV. To avoid the drawbacks of payback period, there is a refined version of it and that is the discounted payback period. It works in similar mode like the payback period with a little difference that instead of using gross cash inflows, it uses present value of these cash inflows. The descent criteria is same as the descent criteria with the payback period. That is, if the payback period computed is lesser than the required payback period, we can accept the project, otherwise not. The determination of payback period where the cash inflows are even like an annuity, the process is the same. We determine present value of annuity and divide the initial cash outlaw over the present value of cash inflows. The resulting figure is the payback period. But if we have uneven cash inflows during the life of the project, then how we can determine the payback period? The process is again same as the process we considered in the payback period. But the difference is that we now require to determine present value of individual cash inflows throughout the life of the period and the cumulative cash flows of present values will determine the payback period. Let's take the example we carry from the previous. We have Rs 6000 as initial investment and we have the same cash inflows each year. Then if we determine the present value of individual cash inflows, we see that till year 2006, this means that at the end of three years, we have cumulative cash flows of 5491. Now we require Rs 509 more in order to break even our initial investment of Rs 6000. But in year four, the cash inflows are discounted at 0.823 and the present value is 823. So we divide 509 over 823. The resulting figure is 0.62 or 62. This means that we require 3.62 years in order to break even on this project given the cash flows are used as discounted cash flows to determine the payback period. But this discounted payback period is not free from certain drawbacks. An important drawback is that if there is a negative NPV, then no discounted payback period can be determined because the recovery of initial investment will not be possible. Then like discounted payback period, this discounted payback period also ignores the cash flows occur beyond the payback period. Then it is not a good measure of profitability as it considers only the solvency aspect and not the profitability. Then there may be a project that may yield though a negative NPV but during the life of the project some positive cash flows may also be there. But this discounted payback period does not consider all of them. And we have average accounting return. In average accounting return, the model is very easy to determine the profitability rate of the capital project. It is based on accounting number and not on the cash flow data. Like payback period, it also ignores the time value of money and the project risk. As we know that there is a cut-off rate in NPV and IRR but for average accounting rate of return there is no such cut-off rate. Therefore, this method is unable to distinguish between profitable investment and an unprofitable investment as we have seen in the case of payback period. To determine average accounting rate of return, we simply divide average net income of a certain period of time over the average book value of the capital project. On the screen, you can see there is an investment cost of $100,000 and we have five years income data. In the last column, we have net income of each year. If we average the net income of five years, the figure is $18,000. If we divide this $18,000 net income over the average book value of $100,000, the resulting return is the 18%.