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Reference no: EM132365200

Cost and Benefit Analysis for Project Appraisal Assignment - Sensitivity Analysis

Learning objectives: application of techniques and tools used in CBA.

Case description: Each student will be provided a set of values for X1 - X31, highlighted in yellow in this document. The student is required to do this assessment using the given set of X1 - X31 values.

Questions -

1. Using the data on costs and benefits provided, submit excel spreadsheets using CBA Builder Simple, note that CBA Builder Simple shows £ and we just consider this as $.

2. Using the information given in a worksheet "Sensitivity Analysis" to answer following questions

a. Discuss the meaning of the calculated value of a break-even discount rate.

b. Discuss the purpose of conducting this type of sensitivity analysis with respect to a range of discount rates.

3. Construct a table listing the major present values of cost and benefits. Use this table and answer two following questions:

a. What are cost (two items) and benefit items (two items) do you think will have the most impact on the net present value of the project? Justify your answers.

b. Take a more pessimistic, what variable(s) in the cost and benefit sides would you like to vary their value (i.e. to change or to modify with various values) in order to assess the sensitivity of the NPV with respect to these variables? Justify your answer.

4. Remove those items that do not have market prices in the cost and benefit sides, then construct a CBA Builder. Using the newly constructed CBA Builder, answer the following questions

a. Fill in answers to the below table

Criteria	CBA Builder with all costs and benefits included (done in Question 1)	CBA Builder without non-market costs and benefits (done in Question 4)
Net Present Value
Break-even IRR
BCR

b. Comment on the implication and significance of including all non-market costs and benefits on the NPV, break-event IRR and IRR.

5. What are other variables that you should consider to conduct sensitivity analysis to avoid possible underestimation and overestimation problems? Justify your answers.

6. Double-counting of benefits and/or costs can happen in CBA, especially with complex impacts. Can you identify any potential double-counting problems in this project? Justify your answers.

Attachment:- Project Appraisal Assignment Files.rar

Reference no: EM132365200

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Online submission requirement - TWO DIFFERENT Excel spreadsheets. Please name your files as Nxxx_CBA_Q1.xlsx and Nxxx_CBA_Q4.xlsx where xxx is your student number. For all other questions: please provide answers in ONE Word or pdf file.

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