PAb581bWeekb3bDQb1bBenefits-CostbAnalysis
Howbdobyoubdeterminebwhetherbabnewbprogrambshouldbbebrecommendedbforbcreationbandbfun
ding?bDobyoubapprovebabprogrambwithbabfavorablebratebofbreturnbandbnetbpresentbvaluebthatbe
xceedsbthebgovernmentalbentity’sbinternalbratebofbreturn?bOr,bdobyoubapprovebabprogrambthatb
servesbthebneedsbofbcitizens,bbutbmaybnotbcreatebthebdesiredbratebofbreturn?bb
Thisbsectionblistsboptionsbthatbcanbbebusedbtobviewbresponses.
CollapsebAllbbb PrintbViewbbb ShowbOptionsbb
Responses
Responsesbareblistedbbelowbinbthebfollowingborder:bresponse,bauthorbandbthebdatebandbtimebth
ebresponsebisbposted.
SortbbyResponseb SortbbyAuthor SortbbyDate
(anbinstructorbresponse)
Benefits-
ProfessorbMaleckaiteb 1/18/2015b1:32:27bAM
CostbAnalysis:bIntro
Class,b
WelcomebtobWeekb3bThread#1!bPleasebconsiderbthebquestionbaboveband,binbprovidingbyourban
swers,bbebsurebtobincludebthebdefinitionsbofbbothbthebNetbPresentbValuebandbthebInternalbRatebo
fbReturn.
Dr.bM
RE:bBenefits-
StephaniebMccallab 1/18/2015b8:23:43bAM
CostbAnalysis:bIntro
Whenbabprogrambisbcreatedbonebofbthebfirstbquestionsbthebcommissionborbadministrationbasksbis,bhow
bmuchbwillbthisbprogrambbringbin?borbhowbwillbwebbenefitbfrombthisbprogram?bThebfinancialboutcomeb
ofbanybprogrambisbimportantbbecausebthebmoneybusedbtobmakebthebprogrambmustbbebearnedbback.b
Thebnetbpresentbvaluebisbthebvaluebofbfuturebcashbflows.bThebIRRbisbthebdiscountbratebthatbisbusedbth
atbmakesbthebnetbpresentbvaluebofballbcashbflowsbfrombabparticularbprojectbequalbtobzero.bTh
ebhigherbthebIRRbthebbetterbthebprojectbisbtobtakebon.b
RE:bBenefits-
1/23/2015b10:14:50bPM
CostbAnalysis:bIntro AyelebKuevib
Thebdeterminationbofbwhetherborbnotbtobsupportbabnewbprogrambwouldbhavebtobbebbasedbonbsever
albelementsbisbthebprogrambneededbbybthebcitizens,bwhatbisbthebratebofbreturnbonbthebprogram,bandb
willbthebgoalsbofbthebprogrambbebachievablebinbabtimebtablebthatbwouldbmakebitbworthbthebinvestm
ent.bSomebprogramsbcanbbebneededbbybthebcitizens,bbutbthebratebofbreturnbwouldbnotbbebbeneficial
btobthebgovernment bunit,band/orbthebtimebframebtobmeetbthebgoalbofbthebprogrambwouldbtakebwaybt
ooblongbtobbebbeneficialbtobthebcommunity.bAlsobthebotherbelementsbcouldbbebinbplace,bnotbneede
dbbybthebcitizensbbutbgreatbratebofbreturnbandbgoodbtimetable.bAllbthesebvariablesbneedbtobmeasure
dbandbdecisionsbwillbbebmade.bInbmostbgovernmentsbthesebdecisionsbarebnotbmadebbybonebperson,
bbutbbybabcommitteeborbbybvoters.
, RE:bBenefits-
DerekbJamesb 1/18/2015b9:48:26bAM
CostbAnalysis:bIntro
Modified:1/20/2015b5:38bAM
"
bbbbbbb b Ifbyoubarebablebtobarticulatebprogramboutcomes,bactivities,bandbindicatorsbandbhav
ebthebstrategiesbinbplacebtobassessbthebquantitybandbqualitybofbthebprogram’sbachieveme
nts,bitbisballbthebmoreblikelybbthatbyoubwillbmakebabpositivebdifferencebinbtheblivesbofbthoseb
youbserve."
bbbbbbbbbbThebcost-
benefitbanalysisbcanbwithbfiguresbalsobdeterminebthebcostbandbbenefitbofbthebprogram.bW
ithbbproperbcalculations,bwillbprovebwhetherbabprogrambwillbbebsuccessfulborbunsuccessf
ul.bThisbmathematicalbbassessmentbcanbalsobevaluatebotherbprogramsbfrombabweightbpe
rspectivebasbtobthebfrugalitybofbservingbthebpublicbfrombabscarcitybofbresources.b
bbbbbbbbbbNetbPresentbValue:b"Thebdifferencebbetweenbthebpresentbvaluebofbcashbinflowsban
dbthebpresentbvaluebofbcashboutflows."b"ThebInternalbRatebofbReturn"bisbthebinterestbrateb
atbwhichbthebnetbpresentbvaluebofballbthebcashbflowsb(bothbpositivebandbnegative)bfrombab
projectborbinvestmentbequalbzero."b
bbbbbbbbbbIbdobapprovebabprogrambthatbservesbthebneedsbofbthebcitizens,bandbdobnotbfavorbabh
ighbratebofbreturn.bBecausebonebofbthebdisadvantagesbwithbthebIRR,bisbthatbalthoughbonbs
omebinvestmentsbabhighbratebofbreturnbinvokesbabsmallbdollarbamountbofbreturn.
bbbbbbbbbbbbbb
Gajda,bR.bJewiss,bJ.Thinkingbaboutbhowbtobevaluatebyourbprogram?bthesebstrategiesbwil
lbgetbyoubstarted"bRetrievebfromb:bhttp://pareonline.net/getvn.asp?v=9&n=8
NetbPresentbValueb(NPV)bDefinitionb|bInvestopia.bRetrievebFromb:bhttp://www.investope
dia.com/terms/n/npv.aspbbb
IAbInternalbRatebofbReturn.(IRR)bbDefinitionb&bExampleb|bInvsetingbAnswers.bbRetrievebF
romb:bhttp://www.investinganswers.com/financial-dictionary/investing/internal-rate-
return-irr-2130
RE:bBenefits-
DorotheabCrawfordb 1/18/2015b9:01:20bPM
CostbAnalysis:bIntro
Modified:1/18/2015b9:07bPM
Netbpresentbvaluebisbdefinedbasbthebsumbofbincomingbandboutgoingbcashbflowsboverbabperiodbofbtime.b
Internalbratebofbreturnbisbabdiscountbappliedbinbcapitalbbudgetingbthatbcanbcausebnetbpresentbvaluebca
shbflowsbtobequalbzero.b
Tobanswerbthebabovebquestion,bthebbestbfinancialbchoicebwouldbbebtobchoosebthebbetterbratebofbretur
n.bHowever,bfrombabpoliticalborbgovernmentalbview,bthebalternateboptionbisbbetterbbecausebitbwouldbb
ebthebmorebacceptableboptionbforbsociety.bInbmanybcasesbthisbisbabcommonbdecisionbmadebdailybamo
ngstbthebgovernmentbandbnonbgovernmentbagencies.bCommunitybbasedborganizationsbwantbtobdobw
hat'sbrightbforbsocietybtobkeepbitsbplacebinbthebcommunitybandbwinbpublicbsupport.bMostbotherborganiz
ationsbfocusbsolelybonbtryingbtobbalancebbetweenbthebmostbfeasibleboptionbandbmakingbsocietybhappy
, .b
RE:bBenefits-
1/21/2015b8:26:35bPM
CostbAnalysis:bIntro JanniebGafiukb
Dorotheabyoubraisebabgoodbdirectionalbpointbofbview-
politicalborbgovernment.bbThebnetbpresentbvaluebandbinternalbratebofbreturnbcanbbebcriticalbforbeitherb
sidebofbthebspectrumbinbthebcashbflowbdecisionbmakingbprocess.bbNPVbandbIRRbshouldbservebasbkeybc
omponentsbinbthebexaminationbtobevaluatebwhetherbinvestmentsborbprojectsbarebworthbpursuing.
https://www0.gsb.columbia.edu/premba/finance/s5/s5_5.cfm
RE:bBenefits-
MarquesbThompsonb 1/19/2015b6:00:34bPM
CostbAnalysis:bIntro
Cost-
benefitbanalystbisbabdecisionbmakingbmethodbthatbthebgovernmentbusesbwhenbdecidingbonbnewbwhet
herbtobmakeborbcontinuebnewbprojects.bbThebbasicsbbehindbthebstrategybarebsimple,bdoesbsocietybben
efitbmorebthanbtheybsuffer,binblaymen'sbterms,bdoesbthebbenefitboutbweightbthebcost.bb"Fivebstepsbm
akebupbformalbcost-
benefitbanalysis:b(1)bcategorizingbprojectbobjectives,b(2)bestimatingbthebproject'sbimpactbo
nbobjectives,b(3)bestimatingbprojectbcosts,b(4)bdiscountingbcostbandbbenefitbflowsbatbanbapp
ropriatebdiscountbrate,bandb(5)bsummarizingbfindingsbinbabfashionbsuitablebforbdecisionbmak
ing"b(Mikesellb309).
Accordingbtobbookbthebinternalbratebofbreturnbisb"thebratebthatbcausesbthebstreambofbnetbben
efitsbinbthebfuturebtobexactlybequalbthebpresentbcapitalbcost"b(Mikesellb321).
Mikesell,bJohn.bFiscalbAdministration,b8thbEdition.bWadsworth,b01/2014.bVitalBookbfile.
RE:bBenefits-
IrynabYafimavab 1/20/2015b10:50:37bAM
CostbAnalysis:bIntro
ThebdefinitionbofbNetbPresentbvaluebNPVbisb"Thebdifferencebbetweenbthebpresentbvaluebofbcashbinflow
sbandbthebpresentbvaluebofbcashboutflows".bThebgoodbexamplebthatbcouldbhelpbtobunderstandbthisbter
minologybandbhowbitbcouldbbebusedbtobmakebbusinessbdecisionsbisbbelow.
"bForbexample,bifbabretailbclothingbbusinessbwantsbtobpurchasebanbexistingbstore,bitbwouldbfirstbestima
tebthebfuturebcashbflowsbthatbstorebwouldbgenerate,bandbthenbdiscountbthosebcashbflowsbintoboneblum
p-
sumbpresentbvaluebamountbof,bsayb$565,000.bIfbthebownerbofbthebstorebwasbwillingbtobsellbhisbbusine
ssbforblessbthanb$565,000,bthebpurchasingbcompanybwouldblikelybacceptbthebofferbasbitbpresentsbabpo
sitivebNPVbinvestment.bConversely,bifbthebownerbwouldbnotbsellbforblessbthanb$565,000,bthebpurchase
rbwouldbnotbbuybthebstore,basbthebinvestmentbwouldbpresentbabnegativebNPVbatbthatbtimebandbwould,
btherefore,breducebtheboverallbvaluebofbthebclothingbcompany."
http://www.investopedia.com/terms/n/npv.asp
RE:bBenefits-
MauricebSlaughterb 1/20/2015b11:15:17bAM
CostbAnalysis:bIntro
Class
Howbdobyoubdeterminebwhetherbabnewbprogrambshouldbbebrecommendedbforbcreationbandbfun
ding?bDobyoubapprovebabprogrambwithbabfavorablebratebofbreturnbandbnetbpresentbvaluebthatbe
xceedsbthebgovernmentalbentity’sbinternalbratebofbreturn?bOr,bdobyoubapprovebabprogrambthatb
servesbthebneedsbofbcitizens,bbutbmaybnotbcreatebthebdesiredbratebofbreturn?bb
Thisbsectionblistsboptionsbthatbcanbbebusedbtobviewbresponses.
CollapsebAllbbb PrintbViewbbb ShowbOptionsbb
Responses
Responsesbareblistedbbelowbinbthebfollowingborder:bresponse,bauthorbandbthebdatebandbtimebth
ebresponsebisbposted.
SortbbyResponseb SortbbyAuthor SortbbyDate
(anbinstructorbresponse)
Benefits-
ProfessorbMaleckaiteb 1/18/2015b1:32:27bAM
CostbAnalysis:bIntro
Class,b
WelcomebtobWeekb3bThread#1!bPleasebconsiderbthebquestionbaboveband,binbprovidingbyourban
swers,bbebsurebtobincludebthebdefinitionsbofbbothbthebNetbPresentbValuebandbthebInternalbRatebo
fbReturn.
Dr.bM
RE:bBenefits-
StephaniebMccallab 1/18/2015b8:23:43bAM
CostbAnalysis:bIntro
Whenbabprogrambisbcreatedbonebofbthebfirstbquestionsbthebcommissionborbadministrationbasksbis,bhow
bmuchbwillbthisbprogrambbringbin?borbhowbwillbwebbenefitbfrombthisbprogram?bThebfinancialboutcomeb
ofbanybprogrambisbimportantbbecausebthebmoneybusedbtobmakebthebprogrambmustbbebearnedbback.b
Thebnetbpresentbvaluebisbthebvaluebofbfuturebcashbflows.bThebIRRbisbthebdiscountbratebthatbisbusedbth
atbmakesbthebnetbpresentbvaluebofballbcashbflowsbfrombabparticularbprojectbequalbtobzero.bTh
ebhigherbthebIRRbthebbetterbthebprojectbisbtobtakebon.b
RE:bBenefits-
1/23/2015b10:14:50bPM
CostbAnalysis:bIntro AyelebKuevib
Thebdeterminationbofbwhetherborbnotbtobsupportbabnewbprogrambwouldbhavebtobbebbasedbonbsever
albelementsbisbthebprogrambneededbbybthebcitizens,bwhatbisbthebratebofbreturnbonbthebprogram,bandb
willbthebgoalsbofbthebprogrambbebachievablebinbabtimebtablebthatbwouldbmakebitbworthbthebinvestm
ent.bSomebprogramsbcanbbebneededbbybthebcitizens,bbutbthebratebofbreturnbwouldbnotbbebbeneficial
btobthebgovernment bunit,band/orbthebtimebframebtobmeetbthebgoalbofbthebprogrambwouldbtakebwaybt
ooblongbtobbebbeneficialbtobthebcommunity.bAlsobthebotherbelementsbcouldbbebinbplace,bnotbneede
dbbybthebcitizensbbutbgreatbratebofbreturnbandbgoodbtimetable.bAllbthesebvariablesbneedbtobmeasure
dbandbdecisionsbwillbbebmade.bInbmostbgovernmentsbthesebdecisionsbarebnotbmadebbybonebperson,
bbutbbybabcommitteeborbbybvoters.
, RE:bBenefits-
DerekbJamesb 1/18/2015b9:48:26bAM
CostbAnalysis:bIntro
Modified:1/20/2015b5:38bAM
"
bbbbbbb b Ifbyoubarebablebtobarticulatebprogramboutcomes,bactivities,bandbindicatorsbandbhav
ebthebstrategiesbinbplacebtobassessbthebquantitybandbqualitybofbthebprogram’sbachieveme
nts,bitbisballbthebmoreblikelybbthatbyoubwillbmakebabpositivebdifferencebinbtheblivesbofbthoseb
youbserve."
bbbbbbbbbbThebcost-
benefitbanalysisbcanbwithbfiguresbalsobdeterminebthebcostbandbbenefitbofbthebprogram.bW
ithbbproperbcalculations,bwillbprovebwhetherbabprogrambwillbbebsuccessfulborbunsuccessf
ul.bThisbmathematicalbbassessmentbcanbalsobevaluatebotherbprogramsbfrombabweightbpe
rspectivebasbtobthebfrugalitybofbservingbthebpublicbfrombabscarcitybofbresources.b
bbbbbbbbbbNetbPresentbValue:b"Thebdifferencebbetweenbthebpresentbvaluebofbcashbinflowsban
dbthebpresentbvaluebofbcashboutflows."b"ThebInternalbRatebofbReturn"bisbthebinterestbrateb
atbwhichbthebnetbpresentbvaluebofballbthebcashbflowsb(bothbpositivebandbnegative)bfrombab
projectborbinvestmentbequalbzero."b
bbbbbbbbbbIbdobapprovebabprogrambthatbservesbthebneedsbofbthebcitizens,bandbdobnotbfavorbabh
ighbratebofbreturn.bBecausebonebofbthebdisadvantagesbwithbthebIRR,bisbthatbalthoughbonbs
omebinvestmentsbabhighbratebofbreturnbinvokesbabsmallbdollarbamountbofbreturn.
bbbbbbbbbbbbbb
Gajda,bR.bJewiss,bJ.Thinkingbaboutbhowbtobevaluatebyourbprogram?bthesebstrategiesbwil
lbgetbyoubstarted"bRetrievebfromb:bhttp://pareonline.net/getvn.asp?v=9&n=8
NetbPresentbValueb(NPV)bDefinitionb|bInvestopia.bRetrievebFromb:bhttp://www.investope
dia.com/terms/n/npv.aspbbb
IAbInternalbRatebofbReturn.(IRR)bbDefinitionb&bExampleb|bInvsetingbAnswers.bbRetrievebF
romb:bhttp://www.investinganswers.com/financial-dictionary/investing/internal-rate-
return-irr-2130
RE:bBenefits-
DorotheabCrawfordb 1/18/2015b9:01:20bPM
CostbAnalysis:bIntro
Modified:1/18/2015b9:07bPM
Netbpresentbvaluebisbdefinedbasbthebsumbofbincomingbandboutgoingbcashbflowsboverbabperiodbofbtime.b
Internalbratebofbreturnbisbabdiscountbappliedbinbcapitalbbudgetingbthatbcanbcausebnetbpresentbvaluebca
shbflowsbtobequalbzero.b
Tobanswerbthebabovebquestion,bthebbestbfinancialbchoicebwouldbbebtobchoosebthebbetterbratebofbretur
n.bHowever,bfrombabpoliticalborbgovernmentalbview,bthebalternateboptionbisbbetterbbecausebitbwouldbb
ebthebmorebacceptableboptionbforbsociety.bInbmanybcasesbthisbisbabcommonbdecisionbmadebdailybamo
ngstbthebgovernmentbandbnonbgovernmentbagencies.bCommunitybbasedborganizationsbwantbtobdobw
hat'sbrightbforbsocietybtobkeepbitsbplacebinbthebcommunitybandbwinbpublicbsupport.bMostbotherborganiz
ationsbfocusbsolelybonbtryingbtobbalancebbetweenbthebmostbfeasibleboptionbandbmakingbsocietybhappy
, .b
RE:bBenefits-
1/21/2015b8:26:35bPM
CostbAnalysis:bIntro JanniebGafiukb
Dorotheabyoubraisebabgoodbdirectionalbpointbofbview-
politicalborbgovernment.bbThebnetbpresentbvaluebandbinternalbratebofbreturnbcanbbebcriticalbforbeitherb
sidebofbthebspectrumbinbthebcashbflowbdecisionbmakingbprocess.bbNPVbandbIRRbshouldbservebasbkeybc
omponentsbinbthebexaminationbtobevaluatebwhetherbinvestmentsborbprojectsbarebworthbpursuing.
https://www0.gsb.columbia.edu/premba/finance/s5/s5_5.cfm
RE:bBenefits-
MarquesbThompsonb 1/19/2015b6:00:34bPM
CostbAnalysis:bIntro
Cost-
benefitbanalystbisbabdecisionbmakingbmethodbthatbthebgovernmentbusesbwhenbdecidingbonbnewbwhet
herbtobmakeborbcontinuebnewbprojects.bbThebbasicsbbehindbthebstrategybarebsimple,bdoesbsocietybben
efitbmorebthanbtheybsuffer,binblaymen'sbterms,bdoesbthebbenefitboutbweightbthebcost.bb"Fivebstepsbm
akebupbformalbcost-
benefitbanalysis:b(1)bcategorizingbprojectbobjectives,b(2)bestimatingbthebproject'sbimpactbo
nbobjectives,b(3)bestimatingbprojectbcosts,b(4)bdiscountingbcostbandbbenefitbflowsbatbanbapp
ropriatebdiscountbrate,bandb(5)bsummarizingbfindingsbinbabfashionbsuitablebforbdecisionbmak
ing"b(Mikesellb309).
Accordingbtobbookbthebinternalbratebofbreturnbisb"thebratebthatbcausesbthebstreambofbnetbben
efitsbinbthebfuturebtobexactlybequalbthebpresentbcapitalbcost"b(Mikesellb321).
Mikesell,bJohn.bFiscalbAdministration,b8thbEdition.bWadsworth,b01/2014.bVitalBookbfile.
RE:bBenefits-
IrynabYafimavab 1/20/2015b10:50:37bAM
CostbAnalysis:bIntro
ThebdefinitionbofbNetbPresentbvaluebNPVbisb"Thebdifferencebbetweenbthebpresentbvaluebofbcashbinflow
sbandbthebpresentbvaluebofbcashboutflows".bThebgoodbexamplebthatbcouldbhelpbtobunderstandbthisbter
minologybandbhowbitbcouldbbebusedbtobmakebbusinessbdecisionsbisbbelow.
"bForbexample,bifbabretailbclothingbbusinessbwantsbtobpurchasebanbexistingbstore,bitbwouldbfirstbestima
tebthebfuturebcashbflowsbthatbstorebwouldbgenerate,bandbthenbdiscountbthosebcashbflowsbintoboneblum
p-
sumbpresentbvaluebamountbof,bsayb$565,000.bIfbthebownerbofbthebstorebwasbwillingbtobsellbhisbbusine
ssbforblessbthanb$565,000,bthebpurchasingbcompanybwouldblikelybacceptbthebofferbasbitbpresentsbabpo
sitivebNPVbinvestment.bConversely,bifbthebownerbwouldbnotbsellbforblessbthanb$565,000,bthebpurchase
rbwouldbnotbbuybthebstore,basbthebinvestmentbwouldbpresentbabnegativebNPVbatbthatbtimebandbwould,
btherefore,breducebtheboverallbvaluebofbthebclothingbcompany."
http://www.investopedia.com/terms/n/npv.asp
RE:bBenefits-
MauricebSlaughterb 1/20/2015b11:15:17bAM
CostbAnalysis:bIntro
Class
