Explore BrainMass
Share

Explore BrainMass

    Cost-Benefit Analysis

    Cost-benefit analysis (CBA) is a method of economic evaluation that estimates the costs and benefits of a project or investment over a period of time, in order to determine if the project or investment is profitable or beneficial. Cost-benefit analysis is important to the study of economics because it is a strong deciding factor whether or not a program, investment, funding, etc, should be implemented. It is used to determine how to allocate resources, whether to engage in trades, if public policies should be implemented, and if major infrastructural programs should be implemented. Following this principle, one should only go ahead with the action if the gains are greater than the costs.

    Cost benefit analysis includes external variables in its analysis, as well as the private economic costs. This is because cost benefit analysis takes into account the social welfare effects of a decision, meaning that the social and environmental impacts of the decision are variables that are accounted for. Also, the effects of the decision in the future are looked at, known as discounting. Discounting is an important part of cost-benefit analysis because it determines what the present value of something now would be in the future. This means that discounting reflects future benefits and costs in present value.

    Once the benefits and costs have been estimated, cost-benefit analysis is presented through net present value (NPV) and benefit-cost ratio (BCR). These are two measures that cost-benefit analysis uses to present the outcome. When a cost-benefit analysis has a positive net present value, then the benefits are greater than the costs. Benefit-cost ratio is simply the ratio of total benefits over total costs. It is important to remember that discounting is applied to both measures. Although cost-benefit analysis is advantageous because it accounts for multiple variables, factors such as inflation have to be properly accounted for.

    © BrainMass Inc. brainmass.com September 17, 2019, 10:58 pm ad1c9bdddf

    Calculating the minimum annual after tax revenue per year

    You are considering purchasing a CNC machine which costs $120,000. This machine will have an estimated life of 9 years with a net after tax salvage of $12,000. Its annual after tax operating and maintenance costs are estimated to be $46,000. To expect an 16% rate of return, what would be the required minimum annual after tax rev

    Computing NPV and IRR

    Biggs-Gridley Memorial Hospital, a non-taxpaying entity, is starting a new inpatient heart center on its third floor. The expected patient volume demands will generate $5,000,000 per year in revenues for the next five years. The new center will incur operating expenses, excluding depreciation, of $3,000,000 per year for the next

    Choosing a project - NPV

    ob Davies must decide whether to invest $100,000 in his own business or in another local business. Both investment projects have an expected life of five years. The cash flow of each is as follows: Year Davies Other 1 $20,000 $10,000 2 30,000 10,000 3 40,000 30,000

    craft your business model to make the most profit

    This solution will look at the concept of profit and business model strategy using simple terms, and a business example with 4 different scenarios. The solution will walk the student through a sole proprietorship that develops into a corporation and starts to grow its business. Different factors will be reviewed, such as variab

    Fixed and variable costs - Lay off decision

    Critical Thinking Question Your insurance firm processes claims through its newer, larger high-tech facility and its older, smaller low-tech facility. Each month, the high-tech facility handles 10,000 claims, incurs $100,000 in fixed costs and $100,000 in variable costs. Each month, the low-tech facility handles 2,000 claims

    Economic Choice & Decision Making

    Consider your last vehicle purchase and the decision making process you engaged in while deciding what vehicle to purchase or if a new vehicle was the right decision. While analyzing your decision, keep in mind that everything from the interest rates to the price of gasoline is driven by the economy in one way or another. Ana

    Accounting: Overhead application

    Problem 4-18: Applying Overhead in a Service Company Heritage Gardens provides complete garden design and landscaping services. The company uses a job-order costing system to track the costs of its landscaping projects. The table below provides data concerning the three landscaping projects that were in progress during May.

    CVP Analysis and BEP Estimate

    Teri Hall; Graphing: Incremental Analysis; Operating Leverage Teri Hall has recently opened Sheer Elegance, Inc., a store specializing in fashionable stockings. Mrs. Hall has just completed a course in managerial accounting and she believes that she can apply certain aspects of the course to her business. She is particularly

    Analyzing the given alternatives

    Frieden Company's contribution format income statement for the most recent month is given below: , Sales (40,000 units) $800,000 Variable expenses $560,000 Contribution margin $240,000 Fixed expenses $192,000 Net operating income $48,000 The industry in whi

    Reviewing Article

    Over the past few years, energy prices have been very volatile—often driven by international political events. For the purposes of this assignment, let's assume that you are the energy manager for a series of three food processing/packaging facilities in Malaysia (two) and Vietnam (one) directed to produce specialty Asian food

    Price Elasticities - Popcorn

    Economists estimate price elasticities more precisely using average price and quantity to computer percentage changes. Thus, Using this formula, compute E for a popcorn price increase from 15 cents to 25 cents per ounce (Figure 4.5 on page 85). Problem 4 Supply Decisions and Costs. a. Complete the following tabl

    Determining the optimal number of plants

    Suppose that any firm intending to produce SOMA must build an integer number of plants: 0,1,2,... Building Q plants costs each firm 3.5 x Q dollars. Each plant produces one unit of SOMA. If firm 1 builds Q1 plants and firm 2 builds Q2 plants, the market price p for one unit of SOMA will be 9 - (Q1 + Q2). For example, if fir

    Calculating the Profit Maximizing Price Level

    You are asked to help in setting the subscription rates of a monthly magazine. As expected, the major component of cost is fixed or sunk; so we ignore it in what follows. Variable cost including printing, shipping, and mailing comes to $30 per year per subscriber. The publisher has an extensive data set suggesting that annual

    Bundle and Mixed pricing

    Soma cable has a educational channel and a music video channel. The viewing audience consists of two segments (A and B). Below shows the segment sizes, their RP's for each channel: A's RP: Educational: $20 Music Video: $2 Segment Size: 4,000 B's RP: Educational: $11 Music Video: $11 Segment Size: 6,00

    Pricing strategies in case of Monopoly

    You are the monopoly seller of computers and monitors. Remarkably, the costs of production for both products are zero. You sell to a market consisting of two segments (A and B). The RP's of each segment for computers and monitors are the following: A's RP: Computer: $2,000 Monitor: $200 B's RP: Computer: $1,500

    Analyzing the Given Cost Data

    Table below gives total cost of producing widgets for variable output levels: Output: 0 1 2 3 4 5 6 Total Cost: 5 6 9 14 21 30 41 Marginal Cost: - 1 3 5 7 9 11 1) What are the firm's fixed production costs? 2) Draw a graph of total production costs vs. number of widgets. 3) Draw a graph

    Calculate the optimal parameters in the given case.

    Please help with the following problems. Provide step by step calculations. A monopolist produces trinkets at $2/unit. The demand for trinkets as a function of unit price p is: D(p) = 100-p. 1) At a unit price of $10, what will the demand be? 2) At a unit price of $10, what will total revenue be? 3) At a unit price of $

    Production Cost Analysis in the Short Run

    Question 1. A firm's production function is the relationship between: the inputs employed by the firm and the resulting costs of production. the demand for a firm's output and the quantity it is able to produce with available resources. the firm's production costs and the amount of revenue it receives from the sale of it

    Calculating Future, Present and Annual Worth

    Use the following cash flow for the problem: i) In year 0 you paid $50000 for a machine ii) In years 1 through 5 you made $10000 per year from the machine iii) In year 3 you had to pay an additional $10000 to keep the machine going iv) In year 5 you sold the machine for $20000 a. Draw the cash flow diagram for this probl

    Cost Estimation: IRR and Future Worth

    Please help with the following problems. 1a. If you solve for an Internal Rate of Return (IRR) using a present worth equation, what value do you set the present worth to in order to solve the equation? b. Jack Black, engineer extraordinaire, had just returned from taking a 30-page exam in his engineering management gradu

    Experience Curve Questions

    a. Your group of technicians has a learning curve for a new task. They are seeing a 20% reduction in time whenever the number of units doubles. If it takes 50 minutes to complete the first item, then how long will it take to complete the 5th item? b. You have a different group of technicians with a different learning curve. T

    Relative Cost and Cost Capacity Factor

    1a. Dr. Brown is making a new flux capacitor. His first flux capacitor cost $100,000 and had a power level of 1.21 GW. His new flux capacitor will have a power level of 2.42 GW. What is an estimate of its cost? (Assume the flux capacitor cost varies like that of a nuclear generating plant.) b. A new power plant has a 4 un

    Marginal Costs and Marginal Benefits Sample Problem

    You are selling your 1995 Honda Civic. You have already spent $1000 on repairs. At the last minute, the transmission dies. You can pay $500 to have it repaired, or sell the car "as is." In each of the following scenarios, should you have the transmission repaired? Explain. A. Blue book value (what you could get for the

    Investments: The Rate of Return

    What is the rate of return on an investment over it's economic life that costs $29,000 and has a $1000 salvage value after 7 years(straight line depreciation) if it can earn $6,000 before taxes annually? Assumes that you are in a 25% tax bracket.

    Selecting Between Alternative Investments

    1. Two computer systems are being compared. System A has a life expectancy of 5 years and will cost $14,000 plus $2,000 annually for maintenance. System B has life expectancy of 3 years and will cost $9,000 plus $700 annually for maintenance. System A will generate about $10,000 income and system B will generate about $9,000. Ea

    Selecting Among Alternative Equipment

    1. You currently have a piece of equipment that is 2 years old and cost $13,000 when it was new. It has five years left on it's economic life and can be traded in for $8,000. It will have annual operating cost of $4,000. A new piece of equipment can be purchased for $18,000 and will have annual operating cost of $1,000. This new

    JC Penney Company Analysis

    OL 501: Business Foundations Corporate Report Analysis & Research Project Worksheet D; Module Topic 6; Due Week 7 Refer to the corporate report for the company you have selected, and the research and assignments you have already concluded, to complete the following tasks. 1. How many shares of the corporation's stock

    Finding the optimal price and output level

    The demand curve for tickets at an amusement park is: Q = D(p) = 1400 - 46p, p > 0 The marginal cost of serving a customer is $11. Using calculus and formulas (but no tables or spreadsheets) to find a solution, how many tickets will be sold at the profit-maximizing price? Round the equ

    Economics: Marginal analysis

    I would like to have the following sample problems solved in EXCEL format so that I can see the formula used. 1. TC = 17 + 2q2 Suppose the firm's output can be sold (in integer units) at $57 per unit. Using calculus and formulas (but no tables or spreadsheets) to find a solution, HOW MANY UNITS should the firm produce t