Cost Benefit Analysis

Topics: Costs, Cost-benefit analysis, Cost Pages: 12 (3624 words) Published: March 19, 2013
Cost benefit analysis of the

Table of Contents

1.0Introduction to Scenario3
2.0Cost Benefit Analysis (CBA)3
2.1 Why CBA using over other project appraisal techniques4
2.2 Merits of Using CBA5
3.0 Steps of Cost Benefit Analysis7
4.0Costs and Benefits of the CG event10
4.1 Cost of the CG event10
4.2 Benefits of the CG event12

1.0 Introduction to Scenario

Every four years, the Commonwealth countries Committee convenes to select the next host city for a commonwealth Games, and these decisions are preceded by strenuous marketing efforts by candidate cities anxious to land the Games. The economic virtues of hosting the event are loudly extolled by those who are endeavoring to hold it, but from a correct economic cost benefit analysis (CBA) perspective, does an commonwealth Games generate positive net benefits for the host nation? The evaluation of the “Commonwealth games(CG)” is unique in the number of challenges it poses for the practitioner of CBA. Sri Lanka expecting to will held the 2024 CG in Sri Lanka. Hosting an event of this nature is challenging experience to the Sri Lankan Government. Generally, always there have been costs and benefits to the country. 2.0 Cost Benefit Analysis (CBA)

Cost Benefit Analysis (CBA) is a technique for evaluating a project or investment by comparing the economic benefits with the economic costs of the activity. Cost Benefit Analysis has several objectives. First, CBA can be used to evaluate the economic merit of a project. Second the results from a series of benefit-cost analyses can be used to compare competing projects. CBA can be used to assess business decisions, to examine the worth of public investments, or to assess the wisdom of using natural resources or altering environmental conditions. Ultimately, CBA aims to examine potential actions with the objective of increasing social welfare. Cost-benefit analysis (CBA) is the implicit or explicit assessment of the benefits and costs associated with a particular choice. Benefits and costs may be monetary or non-monetary. The ultimate result get from the CBA and identify the investment for this project is benefitted or not, result will choose an action if: Benefits (B) > Costs (C)

Net Benefits (NB) = B - C > 0.
Above result comes after CBA ,the investment for the project is benefited Regardless of the aim, all benefit-cost analyses have several properties in common. A CBA begins with a problem to be solved. According to the task given Sri Lankan government expects to host the Commonwealth Games in 2024. Generally, there have been costs and benefits to the country in organizing this event. There are few methods to appraise a project such as Cost Benefit Analysis (CBA), Cost Effective Analysis (CEA), Cost Utility Analysis (CUA), and Multi Criteria Analysis (MCA). As this is a government funded project, evaluation can be done by using Cost Benefit Analysis. Although there are many other techniques to evaluate the investment, cost benefit analysis is the most suitable type to this kind of project. 3.1 Why CBA using over other project appraisal techniques

The main problem in the most public projects appraisal is their uneconomic nature and impossibility to measure such data, like as turnover and current costs, necessary for NPV or IRR calculation. An appraisal of economic efficiency, as a measure of the net contribution of a project to overall social welfare, should be conducted to each single case. Standard appraisal methods based on projected profits and investment expenditures are not applicable because of intangible nature of pure public projects. In such cases Cost Benefit Analysis (CBA) has been applied. A basic assumptions of CBA is an identification the crucial benefits effected from a project and their valuation to conduct project appraisal in terms of its effectiveness. A mixture of benefits and costs will be...
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