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Economic Evaluation Assignment

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Added on  2021-02-20

Economic Evaluation Assignment

   Added on 2021-02-20

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Name: Student #: 49003 ECONOMIC EVALUATIONProject# 2 (Spring 2019)Due: 11 October 2019ANSWER-SHEETMANDATORY TASKPlease summarize your results in the table below: (9 Marks)FinancialEconomicProposal AProposal BProposal AProposal BNPV$3,855,492,108$-131,370,811$1,836,432,471,060$2,442,914,556,575IRR1%-3%468%573%PB1.090.9946.9162B/C (Benefit costratio)0.090.9945.9162.07Life Cycle Cost$79,868,629,189$51,960,588,757$2,497,785,757,570$691,031,668,268.927Equivalent AnnualCost$386819631$-13180369.02$188,261,548,916.22$245,096,418,540.99Consumer Surplus$5$7$175000$126000Producer Surplus$70000$21600$175000$108000Total Surplus$70005$216007$234000$234000Deadweight Loss50004000-5000-4000Note: NPV; Equivalent Annual Cost; Life Cycle Cost; and Surpluses (Consumer, Producer, and Total)and Deadweight Loss - must be rounded off to the nearest billion dollars (i.e., no decimals), and IRR and PB - to the nearest ‘whole’ percents and years (i.e., no decimals), and B/C - to one decimal point only.1.Which proposal will you recommend from investor’s perspective? (2 Marks) A B Either NeitherProposal A will be selected from investment perspective because its NPV, IRR and profitability index ratio is higher then other one . _____________________________________________________________________________________________________ (no more than 10 words)49003-Assign2S2019-answer template Page 1 of 4
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2.From a financial perspective, will you select any of these projects on the basis of the indicator ofConsumer Surplus? (2 Marks) YesNoYes, because project A economically generating good amount of saving for people.____________________________________________________ (no more than 10 words)3.Will your recommendation, based on economic perspective, change if the opportunity cost of money is zero? (2 Marks) Yes NoNo, because opportunity cost is zero then it means that if investment is done on project A benefit will not lost in another project. Zero opportunity cost make decision to pick project A firmer. _________________________________________________________________________________________________________________ (no more than 10 words)4.In Figure 2, will the response of demand to changes in prices in the range of 9 to 12 cents per unit be: (2 Marks) ElasticInelasticDemand is elastic because with change in price demand also get changed.____________________________________________________ (no more than 10 words)5.Will your recommendation, based on economic perspective, change if – due to unanticipated global financial turmoil – there is hyperinflation after the first ten years of the projects’ life spans? (2 Marks) Yes NoNo, because IRR of project B is already high, if inflation increase it will then also will be viable.____________________________________________________ (no more than 10 words)49003-Assign2S2019-answer template Page 2 of 4
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