ELD CAMPUS

Module: Cost-benefit analysis

Learning objectives: 

  • Be able to describe the basic elements of a cost-benefit analysis
  • Know the difference between a financial and a total economic value CBA
  • Understand the importance of a sound context analysis
  • Understand the principle of deriving incremental net benefits from the comparison of different scenarios
  • Have an understanding on the quantification of different costs and benefits (units)
  • Understand what a discount factor and rate is and be able to discuss the consequences of applying different discount rates
  • Understand the terms shadow prices and opportunity costs
  • Understand how important indicators to conclude on a project worth are computed and have basic ideas on how to interpret them
  • Have a basic understanding on how economic costs are derived from financial values and how to undertake a sensitivity analysis

Contents:

  • The logic and basic elements of a cost-benefit analysis and the importance of a sound context analysis
  • “With project” and “without project” scenarios
  • Time preference and discounting (choice of social discount rate and factor)
  • Economic indicators to conclude on a project's worth (e.g., net present value (NPV), internal rate of return (IRR) and benefit-to-cost-ratio (BCR))
  • Derivation of economic costs and benefits from financial values
  • Uncertainty and sensitivity analysis

Estimated duration of the lecture: 

40 minutes (overview; to obtain learning objectives there is need to in-deepen different parts, which can be done with the help of the self-study module) 

Estimated time for studies:

1-2 days, depending on the level of previous knowledge and interests

RESOURCES

  • Lecture: Cost-benefit analysis

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