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This lecture is part of lecture series for Engineering Economics course at M. J. P. Rohilkhand University. It was delivered by Dr. Badrinath Singh to cover following points: Evaluation, Public, Alternatives, Capital, Sources, Financing, Project, Benifits, Efficiency, Measurement
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Private Versus Public Projects
PURPOSE
Private Project -- Maximize profit, minimize costs Public Project -- Offer social benefits at minimum cost (i.e., health, employment ) without profit
CAPITAL SOURCES
Private Project -- Private investors and lenders Public Project -- Taxation; Private Lenders
FINANCING
Private Project -- Individuals (for sole proprietorships and partnerships); stocks and corporate bonds (for corporations) Public Projects -- Direct taxes, Low, no-interest or private loans, bonds, subsidies
PROJECT BENEFICIARIES Private Project -- Those undertaking project Public Project -- General public CONFLICT OF PURPOSES More common for public projects (i.e., dam for flood control vs environmental preservation) CONFLICT OF INTERESTS More common for public projects (i.e., intra-agency conflicts) POLITICAL INFLUENCE More common for public projects ( i.e., changing decision makers, pressure groups, financial and residential restrictions) EFFICIENCY MEASUREMENT Private Project -- Rate of Return on capital Public Project -- No direct comparison with private projects
Private Versus Public Projects
Benefits - The favorable consequences of the project to
the project sponsors (i.e., the public for public projects)
Costs -- Monetary disbursements required (i.e., of the
government for public projects)
Disbenefits -- The negative consequences of the project to
the project sponsors
Benefits, Costs, And Disbenefits
Conventional Benefit / Cost (B/C) Ratio With Present Worth
PW (benefits of the proposed project)
B/C = ---------------------------------------------
PW (total costs of the proposed project)
Bp = Present worth of total benefits
P = Initial Investment
Cp = Present worth of cost of operation & maintenance
Bp BF BA B/C ratio = ---------- = ---------------- = ----------------- P + Cp PF + CF PA + C