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
Further information: www.eld-initiative.org/en/knowledge-hub/eld-campus/
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