CBA

SOCIAL COST-BENEFIT ANALYSIS (CBA)

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Case Study

Class exercise, and solution, of a water project (based on actual data). Check, with an example of your own, that "instant investments" may indeed result in a lower Net Present Value

Readings

- CBA typical steps (by Pere Riera)

- Relationship among the result indicators: Net Present Value, Benefit to Cost Ratio, Internal Rate of Return, and Break-Even Point

- Class notes from a Barcelona Graduate School of Economics equivalent subject (by Pere Riera)

Video

Three part video of a similar class on this topic [1], [2], [3] (by Pere Riera, in Spanish)

Suggested homework

  • Perform a standard Social Cost-Benefit Analysis (CBA) for a change (investment, policy…) of your choice. Submit the matrix (values are to be invented) and a one-page-maximum “executive summary.” The summary has to detail (a) the change to be evaluated in concise and clear terms, (b) a short definition of the costs and benefits included, (c) the results, and (d) your recommendation

  • Check the relationship among the result indicators: Net Present Value, Benefit-Cost Ratio, Internal Rate of Return, and Break-Even Point

Other References

- Boardman, Anthony E., David H. Greenberg, Aidan R. Vining, and David L. Weimer (2011), Cost-Benefit Analysis: Concepts and Practice. Third Edition, Pearson (Prentice Hall), Upper Saddle River, NJ.

- Sugden, Robert, and Alan Williams (1978) The Principles of Practical Cost-Benefit Analysis. Oxford University Press, Oxford, UK,

Inquiries and suggestions: Pere Riera prieram@gmail.com