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Published byDrusilla Hicks Modified over 9 years ago
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Cost Benefit Analysis As economists, we are usually called in when the project is already designed.
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C-B Analysis should be mandatory for bigger projects Since costs and benefits to the society at large are often different from the costs and revenues of an enterprise, a farm development project, the establishment of an agro-industry factory – economists have an important role in the design phase Most of you will probably be working with smaller projects – still a C/B analysis can be useful.
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Three analytical steps 1.Cash Flow Analysis 2.Economic Analysis – sensitivity analysis 3.Financial Analysis
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Cash Flow Analysis Out1234…t Investments Working capital Replacements Recurrent costs Maintenance TOTAL OUT
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IN123…t Revenues Residual valuex TOTAL IN TOTAL OUT NET CASH FLOW
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So we have got the NCF; what next?
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Terms used NPV Net present value Cost Benefit Ratio B/C, or B*/C* IRR Internal Rate of Return The mathematics and Excel.
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