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Uk Cba & Investment On Construction Projects

Especially for public works and infrastructure projects by the government, economic cost-benefit analysis plays an important role for many reasons. Traditional cost-benefit analysis that are made by finance and accounting trained individuals take into consideration monetary costs versus monetary benefits — or profits — into the situation. However, economic cost-benefit analysis, although taking these factors into consideration, is used for public works because it takes two additional factors into consideration in competition.

The first are the nonmonetary opportunity costs that are generated by the project. Opportunity costs, although sometimes nonessential in financial transactions, because of the wide availability of technology in order to assist financial transactions which effectively remove search in transaction costs, infrastructure and construction projects have opportunity costs — both positive and negative externalities — that must be taken into consideration (Begg et al. 2008).

Also, the accomplishment of public Works could not be made instantaneously, and there is a time factor involved in the process. In such time factors and their costs to society, economic cost-benefit analysis uses theory of discounting in net present value which in order to determine the actual costs in prison terms rather than the future turns the project. Also, such cost-benefit methods take into

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consideration other inputs such as the willingness to pay a willingness to accept of individuals, the travel costs, and even the cost of health of such projects (I. Bateman et al. 1993).

It is invaluable especially for projects that would impact the immediate population and environment and is therefore used in government and public works projects. For example, a study published in 1998 discusses the importance of cost-benefit analysis to environmental policy especially in the construction and infrastructure sector of the United Kingdom (Pearce 1998). Such studies form the basis of the theoretical and conceptual framework for designing experiments and economic statistics do the real costs and future benefits of infrastructure projects to the improvement of transportation in the UK.

Another study used a modified version of cost-benefit analysis to use the most modern zonal travel costs benefits in order to assess the improvements highways in the United Kingdom(Dobson et al. 2001). Here, researchers have identified that although the financial benefits of the project may be beneficial to the region, there are actual good opportunity costs that are involved which resulted in a reassessing of the project plans and the amount — considering the negative externalities — that would be taken by such a project from the revenues of the government.

References:

Bateman, I. , Turner, R. K. & Bateman, S. , 1993. Extending cost benefit analysis of UK highway proposals: environmental evaluation and equity. Project Appraisal, 8, 213–213. Begg, D. , Fischer, S. & Dornbusch, R. , 2008. Economics 9th ed. , McGraw Hill Higher Education. Dobson, J. et al. , 2001. International migration and the United Kingdom: Recent patterns and trends. RDS Occasional Paper, 75. Pearce, D. , 1998. Cost benefit analysis and environmental policy. Oxford Review of Economic Policy, 14(4), 84–100.

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