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ENGG 209 (6)

Cost Benefit Analysis

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University of Calgary
ENGG 209
Ronald Schlenker

1.Framework of BCA A) identify the users benefits/disbenefits I) primary benefits are direct II) secondary benefits are indirect B) quantify benefits C) identify and quantify sponsors costs I) capital costs II) operating costs III) some costs affect through revenues D) determine the equivalent benefits and costs at same base periods sing an appropriate discount rate (social discount rate - SDR) I) project without private counterparts - project should reflect long term government borrowing rate II) project with private counterparts - SDR should reflect rate that could have been earned in the private sector E) accept the project if equivalent benefits > equivalent costs 2.Example:northwest LRT - under construction in early 1980s A) Calgary has very concentrated core and very low density population B) peaking problem in downtown streets C) potential solutions I) structural:build and spend money II) institutional:flex times,decentralizing activity,car free zones,multi- passenger vehicle lanes,toll roads,do nothing D) identification and quantification of benefits and costs I) Benefits (all values in 1982 $) - value of time saved by LRT users - estimated 30000 users/day (at peak times) (actuals were 23000 for 15 years) - without LRT,80% would use buses & 20% would use cars - previous bus users would save 5 minutes/trip - previous car users would add 8 minutes/trip -Time Saved = [(5x0.8x30000 - 8x0.2x30000) min/trip]
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