ppt课件-lecture11benefitcostanalysis.pptVIP

Benefit Cost Analysis Typically used for public projects The goal is to determine if benefits exceed costs: Benefit / Cost Ratio 1 The goal is NOT to maximize B/C Ratio. Interest rates used are typically lower than those used by businesses. Typically 4% - 8% (6.5% is typical) OMB requires 10% (except water proj.) * Benefit Cost Analysis The challenge is to quantify the benefits and costs. The equation… B/C = (Benefits – Disbenefits) to the public (Costs) to sponsoring agency You can use NPW, EAW, even NFW – whichever is easier in a particular problem. * Benefit Cost Analysis Steps: Define the planning horizon. Specify the Discount Rate (MARR) to be used. Develop the cost and benefit-disbenefit profiles in monetary terms. Compare the benefits to costs using a specified measure of worth, such as annual equivalent or present worth. If the B/C ratio is: 1 project is justified = 1 barely justified – political 1 not justified 6. Repeat steps 3 – 5 for alternative viewpoints * Example A city library is to be expanded to include meeting rooms, more electronic volumes, computer facilities, and electronic check-in and check-out. The cost of the expansion will be $700,000 and the new equipment will cost another $175,000. Maintenance and renewal of the new addition and equipment will run approximately $100,000/year. The library is projected to be in operation for 20 years, with a residual value of 40% of first cost for the physical facilities. There is no salvage value for the equipment. Discount is 8%. An estimated 150,000 people will visit the library each year. How much additional benefit per person, per year, must the library visitors perceive in order to justify the expansion? * Perspective Matters Suppose the library charged an annual fee Suppose the entire county sponsored The equation… B/C = (Benefits – Disbenefits) to public (Initial Investment) by sponsor What is the viewpoint of a user? What is th