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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.

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

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CVP Analysis and BEP Estimate

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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

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Pricing strategies in case of Monopoly

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Analyzing the Given Cost Data

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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

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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

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

Conceptual Cost Estimate Sample Questions

1. An owner is thinking about building a 35,000 seat stadium. He has data from another stadium being built that shows that it is costing about $11.8 million for a similar stadium that seat will seat 42,000 people. Estimate the cost for the owner. 2. A process plant is going to be built that will have a capacity of 28,000 barr

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

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

Expected Payoff of Shirker or a Hard Worker

Suppose you have hired a new worker, unfortunately you do not know if the worker is a shirker or a hard worker. Suppose working hard raises the probability of making a sale from 40% to 80% (thus raises the probability of making a commission C by the same percentage). If the cost of working harder is $150,what commission C should

Econ Questions

Suppose a firm in an oligopolistic industry faces the following demand curve: P = 4,800 - 0.4 Q for Q < 3,000 P = 20,000 - 2 Q for Q > 3,000 Suppose further its Cost function is as follows: TC = 1,000 + 100Q + 0.5 Q2 a. What price do you suppose they will charge in the short run? b. What do you suppose will happen in the l

Shifts in supply and demand curves: Determinants and Equilibrium

Think about a product that you have purchased recently (e.g. soda, diapers, takeout meals, milk, shoes, manicure/pedicure, video game, etc.). Explain how the law of demand affected your purchase. Give specific examples of how the determinants of demand and supply affect this product (T-I-P-E-N and P-R-E-S-T). What happens to the

Calculating the Opportunity Loss

Josephine makes $100 a day as a flower shop attendant. She takes off two days of work without pay to travel to another city to attend her sister's wedding. The cost of transportation for the trip is $180 round trip. The cost of her hotel stay is $99 per night and she stays for 2 nights. What is the opportunity cost of Josephine'

Need assistance and guidance/explanation on solving problems

Use the table below to answer the following questions: Table Output Total Cost 0 $10 1 $20 2 $28 3 $38 4 $53 5 $73 6 $99 a. What are variable costs of producing 5 units? b. What is average total cost of producing 3 units? c. What is average fixed cost of producing 4 units? d. What is the marginal cost

Government Spending Efficiencies

Please help with the following problem: How would you propose a series of taxes or other revenue measures to address your state's financial crisis? Provide reasoning for your approach.

Economic Causes and Costs of World War I

Provide an analysis of the economic/political causes of World War I. The response is 1000 words and includes references cited. It is a study guide that will help students to further research the topic.