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Evaluation of Public Alternatives-Engineering Economics-Lecture Slides, Slides of Microeconomics

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

Typology: Slides

2011/2012

Uploaded on 07/06/2012

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Module No. 12
Evaluation of Public alternatives
Engineering
Economics
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Module No. 12

Evaluation of Public alternatives

Engineering

Economics

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