Lecture No66-1

Lecture No66-1 - BenefitCostRatio Lecture No. 66 Chapter 16...

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Benefit-Cost Ratio  Lecture No. 66 Chapter 16 Contemporary Engineering Economics Copyright © 2006
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Benefit-Cost Analysis The Benefit-cost analysis is commonly used to evaluate public projects . Benefits of a nonmonetary nature need to be quantified in dollar terms as much as possible and factored into the analysis. A broad range of project users distinct from the sponsor can and should be considered—benefits and disbenefits to all these users can and should be taken into account.
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Framework of Benefit-Cost  Analysis 1) Identifying all the users and sponsors of the project. 1) Identifying all the benefits and disbenefits of the project. 2) Quantifying all benefits and disbenefits in dollars or some other unit of measure. 3) Selecting an appropriate interest rate at which to discount benefits and costs in future to a present value.
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Benefit-Cost Ratio Criterion Benefit -Cost Ratio = Equivalent Users' Net Benefits Equivalent Sponsor' s Net Cost If this BC ratio exceeds 1 , the project can be justified.
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This note was uploaded on 03/11/2010 for the course CEVE 322 taught by Professor Segner during the Spring '10 term at Rice.

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Lecture No66-1 - BenefitCostRatio Lecture No. 66 Chapter 16...

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