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    Cost Benefit Analysis and Risk Analysis Techniques: Poultry Farm Group

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    Manasi Acharya
    Cost benefit analysis and risk analysis techniques are decision making tools for evaluating projects and activities. Cost benefit analysis measures and compares the costs and benefits of a course of action to determine if it is worthwhile. There are three types of costs - social, private, and external. Risk analysis examines three types of risk: stand-alone risk of a single project, corporate risk of how a project impacts a company's overall risk, and market risk of how a project affects shareholder portfolio risk. Common risk analysis techniques include sensitivity analysis, analysis under different assumptions, reduced payback periods, increased hurdle rates, probability analysis, and beta analysis.

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    Cost Benefit Analysis and Risk Analysis Techniques: Poultry Farm Group

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    Manasi Acharya
    26 views11 pages
    Cost benefit analysis and risk analysis techniques are decision making tools for evaluating projects and activities. Cost benefit analysis measures and compares the costs and benefits of a course of action to determine if it is worthwhile. There are three types of costs - social, private, and external. Risk analysis examines three types of risk: stand-alone risk of a single project, corporate risk of how a project impacts a company's overall risk, and market risk of how a project affects shareholder portfolio risk. Common risk analysis techniques include sensitivity analysis, analysis under different assumptions, reduced payback periods, increased hurdle rates, probability analysis, and beta analysis.

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    Cost benefit analysis and risk analysis techniques are decision making tools for evaluating projects and activities. Cost benefit analysis measures and compares the costs and benefits of a course of action to determine if it is worthwhile. There are three types of costs - social, private, and external. Risk analysis examines three types of risk: stand-alone risk of a single project, corporate risk of how a project impacts a company's overall risk, and market risk of how a project affects shareholder portfolio risk. Common risk analysis techniques include sensitivity analysis, analysis under different assumptions, reduced payback periods, increased hurdle rates, probability analysis, and beta analysis.

    Copyright:

    Attribution Non-Commercial (BY-NC)
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    Download as pptx, pdf, or txt
    26 views11 pages

    Cost Benefit Analysis and Risk Analysis Techniques: Poultry Farm Group

    Uploaded by

    Manasi Acharya
    Cost benefit analysis and risk analysis techniques are decision making tools for evaluating projects and activities. Cost benefit analysis measures and compares the costs and benefits of a course of action to determine if it is worthwhile. There are three types of costs - social, private, and external. Risk analysis examines three types of risk: stand-alone risk of a single project, corporate risk of how a project impacts a company's overall risk, and market risk of how a project affects shareholder portfolio risk. Common risk analysis techniques include sensitivity analysis, analysis under different assumptions, reduced payback periods, increased hurdle rates, probability analysis, and beta analysis.

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    Cost Benefit Analysis and Risk Analysis Techniques

    Poultry Farm Group

    Cost Benefit Analysis


    CBA has been established primarily as a tool for use by governments in making their social and economic decisions. CBA measures costs and benefits to the community of adopting a particular course of action e.g. Constructing a dam, by-pass etc. CBA is a decision making device for evaluating activities that are not priced by the market. CBA attempts to simulate a market result in areas where the market does not operate to establish prices OR attempts to quantify and include in estimates of cost and benefits to client but also to rest of community.
    ss4 2

    Cost Benefit Analysis


    Other issues Is the project worthwhile financially? Is it the best option? Should it be undertaken at all?

    ss4

    Cost Benefit Analysis


    Costs of a project can be divided into three areas Social cost:
    being the sum total of costs involved as the result of an economic action

    Private costs:
    Those that affect the decisions of the performers (ie production costs including, labour, materials, lands and capital)

    External Costs:
    Resulting from damage to buildings or decline of property values through smoke emanating from a factory, etc.
    ss4 4

    Establishing a steel production plant in a port community Costs (-) construction. pollution. devaluing house prices etc. Benefits (+) employment increase port trade steel for local industry

    Three types of project risks associated with capital budgeting:


    Stand-alone risk Corporate risk Market risk

    1. Stand-Alone Risk This risk assumes the project a company intends to pursue is a single asset that is separate from the company's other assets. It is measured by the variability of the single project alone. Stand-alone risk does not take into account how the risk of a single asset will affect the overall corporate risk.

    2.Corporate Risk This risk assumes the project a company intends to pursue is not a single asset but incorporated with a company's other assets. As such, the risk of a project could be diversified away by the company's other assets. It is measured by the potential impact a project may have on the company's earnings.

    3.Market Risk This looks at the risk of a project through the eyes of the stockholder. It looks at the project not only from a company's perspective, but from the stockholder's overall portfolio. It is measured by the effect the project may have on the company's beta.

    Risk Analysis Techniques


    Sensitivity analysis (Change one input (holding all others constant) and observe its impact on NPV) Analysis under different Assumptions
    Best , Worst, Most Likely

    Reduced Payback Periods Increased Hurdle Rates( Increase in Expected Rate of Return) Probability Analysis( In Different cases of Probability) Beta Analysis ( Analysis of Risk of Projects in comparison to Market)

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