Cost Benefit Analysis

Cost Benefit Analysis

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Cost Benefit Analysis [ECON 453]
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Assignment II
Aditya Gurung

Dr. T.M. Horbulyk
April 2, 2012

1. Based on the article, describe as best you can:
(i) The reference group for the cost benefit analysis
Reference group for the cost benefit analysis (CBA) refers to the set of persons whose gains and losses are to be included as directly relevant to the project decision-making process. It is a sub set of people who will be benefited or affected by the implementation of the project. In the case of Bolu Mountain Tunnel project, the set of people who will directly benefit from the implementation of the project are the people who can now avoid traveling by Bolu Mountain Passage (D100 highway) as they can get to there destination by traveling through the tunnel in much safer conditions along with reduced travel time.
(ii) The purpose of the study
The purpose of any social CBA is to examine and assess whether or not the social benefits of the proposed policy or project outweigh its social cost. By doing so, it can assist decision-making by facilitating the allocation of resources to their most valuable application. In the case of given article, the purpose of the study is to conduct the CBA of the Bolu Mountain Tunnel Project and examine if the project is worth to be implemented.
(iii) The estimated project life over which the project is evaluated
The estimated project life is the optimal period over which the project should be run to maximize its return to the project implementer. In other words, it is the project’s economic life over which the project is evaluated. In our case in study, the assumption made for the estimated project life is of 50 years.
(iv) formative or summative
These are models of CBA analyses that differ from one another. In formative analysis, the project design is endogenous to the analyst sphere of influence and one of the important...

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