This website uses cookies to ensure you have the best experience. Learn more

Cost Benefit Analysis

3849 words - 16 pages

Cost Benefit Analysis [ECON 453]
Assignment II
Aditya Gurung

Dr. T.M. Horbulyk
April 2, 2012

1. Based on the article, describe as best you can:
(i) The reference group for the cost benefit analysis
Reference group for the cost benefit analysis (CBA) refers to the set of persons whose gains and losses are to be included as directly relevant to the project decision-making process. It is a sub set of people who will be benefited or affected by the implementation of the project. In the case of Bolu Mountain Tunnel project, the set of people who will directly benefit from the ...view middle of the document...

Where as in summative analysis, the project design is exogenous to the decision making of the analyst and the analyst compares one or more alternatives defined by someone else. In the case of CBA of Bolu Mountain Tunnel, it is a summative analysis because the design of the tunnel is some thing that lies outside the influence of the CBA analyst.
(v) ex ante or ex post
Any CBA can be either ex ante or ex post analysis depending on the timing of the analysis being under taken relative to the implementation of the project. Any CBA carried out before the implementation of a policy or project is an ex ante analysis and similarly the CBA undertaken after the implementation of the project is ex post. Since the relevant project of Bolu Mountain Tunnel has already been implemented and opened for the use by public, this particular CBA is an ex post analysis.
(vi) social or private CBA
Social and private CBA differ incisively in their reference group, though there are major differences in the way they are calculated as well. While some social groups will typically make up the reference group of the social CBA, that for private CBA will typically be some narrowly defined agents such as share holders of a firm and so on. Since this project pertains to the overall society and is not limited to the scope of any individual firm, it is a social cost benefit analysis.
2 (a) Briefly describe the major categories of expected benefits and expected costs from undertaking the project, as explained by the author.
Based on the article, the expected benefits from undertaking the project can be categorized into three headings and they are accident cost savings, vehicle operating cost savings and travel time savings. Accident cost savings incorporates all the benefits that result from the reduction in accidents due to better driving conditions. The major components of this savings are the reductions of the opportunity cost to the society resulting from the loss of productive factor in labor involved in the accidents and the material damage costs from the accidents. To account for the reduction of personal injuries and deaths due to the project implementation and monetize the value of this expected benefit, the loss of production approach is employed. Similarly, vehicle operating cost savings includes benefits derived by the individuals traveling in better conditions that occur due to expected reductions in roughness of pavements as a result of pavement improvements. According to the author, this will reduce the operating cost of vehicle and depreciation of the vehicle, hence a benefit. The third category of expected benefit is the expected savings generated in travel time due to improved road conditions. To monetize this benefit, the authors have used variables such as traveler’s income, type of trip, day of the week and so on. Taking these variables and working them with the reduced travel distance time of 2.5 hours on average, the authors have monetized travel...

Other Papers Like Cost Benefit Analysis

Cost Benefit of College Education Essay

1765 words - 8 pages Cost and Benefits of Getting a College Education Abstract This paper is an analysis of pursuing college education, based on years 2004 to 2008. As a working professional, college education is one of the most important credentials needed in starting a career. Despite the limitations, a rational and ambitious individual would undoubtedly seek such a level of education. With the present economic conditions, the cost of getting a college degree is

Strategic Management In Banking Industry Essay

647 words - 3 pages , selling, and distribution. It is thus the provision of such analysis and classification of expenditure as will enable the total cost of any particular unit of production or service to be ascertained with reasonable degree of accuracy and at the same time to disclose exactly how such total cost is constituted( i.e. the value of material used, the amount of labour and other expenses incurred ) so as to control and reduce its cost. According to

Decisions in Paradise Ii

871 words - 4 pages Nik. Both parties have decided to use the analysis of cost-benefit of the Resort in Kava. Cost-benefit analyses “adds up the value of the benefits of a course of action and subtract the costs that are associated with the change” (Mind tools, Para 4, 2010). This is one of the most effective tools for explaining the expenditures for the project. Cost-Benefit Analysis By utilizing this technique, Alex and Nik will be able to determine if the


583 words - 3 pages short periods of time without making fundamental changes Discretionary fixed costs (managed fixed costs)- usually arise from annual decisions by management to spend on certain fixed cost items Relevant range- the range of activity within which the assumption that cost behavior is strictly linear reasonably valid Mixed cost- contains both variable and fixed cost elements Account analysis- an account is classified as either variable or fixed


651 words - 3 pages associated with it. Activities cause costs Repairing defective units is a nonvalue added activity “The concept of considering both the costs and benefits of a proposal is cost-benefit analysis. Managers should perform cost-benefit analyses to assess whether proposed changes in an organization are worthwhile. The concept of cost-benefit analysis applies equally to deciding whether to implement a new cost accounting system. The benefits from an

Decisions in Paradise Pt. Ii

1120 words - 5 pages - brainstorm as an escalating group, after two people brainstorm a 3rd is added, then the 4th, and so on; helpful when many are involved in the process and chance for disagreement is high. 9. Cost/Benefit Analysis - choose based on financial viability; helpful when goals and costs are clear. 10. Cash Flow Forecast - choose based on revenue generation; helpful when goals are profitable. 11. Decision Tree Analysis - choose option based on


450 words - 2 pages to justify their decision. What moral principles do you think they would invoke? The evidence suggests that Ford relied, at least in part, on cost-benefit reasoning, which is an analysis in monetary terms of the expected costs and benefits of doing something. There were various ways of making the Pinto’s gas tank safer. Although the estimated price of these safety improvements was $11 per vehicle, Ford evidently reasoned that the increased

Managerial Analysis

528 words - 3 pages Managerial Analysis Charity Birdow Accounting/561 July 16, 2015 Janet Forney Managerial Analysis Ideal Manufacturing Company has a great opportunity to increase their profits as well as make up for their loss in the Research and Development (R&D) Department. They have recently been asked by outside companies to use their services, which has never been done before. Because the operation cost of the R&D Department has gotten out

Principles of Effective Management

586 words - 3 pages cost caused by a very small (just one unit) change in the output or input of each alternative. Marginal analysis supports decision-making based on marginal changes to resources. Marginal analysis helps to use scare resources to maximize the benefit of output produced. Cardinal approach and ordinal approach use marginal analysis. * In cardinal approach MUAPA=MUBPB * In ordinal approach MRS = Price Ratio

Social Security - Age 62 or 65

1660 words - 7 pages Cost Benefit Analysis Drawing Social Security at Age 62 or Age 66 Cost Benefit Analysis of Drawing Social Security at age 62 or age 66 A considerable portion of the American population is approaching eligibility for Social Security benefits. Many in this aging demographic have been negatively affected by the economic recession. Since Social Security may be the major source of income for the

The Ford Pinto Case

611 words - 3 pages Right or Not Right? Back Ground In 1970’s, Ford had been criticized by the public due to a defective fuel system design. Although Ford had access to a new design which would decrease the possibility of the Ford Pinto from exploring, the company chose not to redesign the system, which would have cost $11 per car, even though the analysis showed that the new system would result in 180 less deaths (1999, The Valuation of Life As It Applies To the

Related Essays

Cost Benefit Analysis

1342 words - 6 pages A cost benefit analysis is done to determine how well, or how poorly, a planned action will turn out. Although a cost benefit analysis can be used for almost anything, it is most commonly done on financial questions. Since the cost benefit analysis relies on the addition of positive factors and the subtraction of negative ones to determine a net result, it is also known as running the numbers. Cost Benefit Analysis A cost benefit analysis

Cost Benefit Analysis

720 words - 3 pages “Cost-Benefit Analysis” (e-Activity part I-IV) Scenario; support the reasons for recommending and accepting the financial implications of Project A over the superiors choice for Project B. After reviewing all the information in the e-Activity on the process of capital budgeting it is important to remember the stipulation of the critical acceptance level of 2.75 years and the Internal Rate of Return is set at 12% when making the decision

Cost Benefit Analysis Of Three Gorges Project

1684 words - 7 pages Cost-Benefit Analysis of Three Gorges Project Shen Bojiu China is working on the controversial Three Gorges project. Are such projects economically justified? 1. Introduction The Three Gorges Project (TGP) in China is the largest hydro project in the world. The project was first proposed by Sun Yat-sen in 1919, and 84 years later, in 1993, the project has started its construction. The TGP has three phases. The first phase is from

Health & Safety Cost Benefit Analysis Of A S

1756 words - 8 pages findings have been included. It will highlight any health & safety deficiencies discovered and the proposals for rectification of the deficiencies. The proposals will identify new work places, equipment, processes and activities that will reduce the hazards to employees and others who may be affected. The report will also include a cost benefit analysis and a recommended time scale for the actions based upon risk ranking. Findings 1. High