Case study: CBA to a ferry project In any cost-benefit exercise it is usually convenient to proceed in two stages (a identify costs and benefits incurred and value the cost and benefits in each year of the project: (obtain an aggregate "present value"of the project by discounting"costs and benefits in future years to make them commensurate with present cost and benefits and then add them up
◼ In any cost-benefit exercise it is usually convenient to proceed in two stages: (a) identify costs and benefits incurred and value the cost and benefits in each year of the project; (c) Obtain an aggregate "present value" of the project by "discounting" costs and benefits in future years to make them commensurate with present cost and benefits, and then add them up. Case study: CBA to a ferry project
stage 1- identify costs and benefits incurred and value the cost and benefits in each year of the project consumer's surplus for four parties identified a The taxpayers_ lose $30,000, assuming the bridge is financed by extra taxes. (once and for all) a The ferry owners lose their excess profits of $250 [i.e. 0.05 X 5,000]in each future year for ever. area a on figure) a The existing travelers gain $1,000[0. 20* 5,000 in each future year for ever, due to the fall in price area A+B) a The new travelers: area C=(0. 20+0/2*20000=$2,000 for each future year for ever
consumer’s surplus for four parties identified: L The taxpayers lose $30,000, assuming the bridge is financed by extra taxes. (once and for all) L The ferry owners lose their excess profits of $250 [i.e. 0.05 * 5,000] in each future year for ever. ( area A on figure) L The existing travelers gain $1,000 [ 0.20* 5,000] in each future year for ever, due to the fall in price ( area A+B). L The new travelers: area C = (0.20 +0 )/2 * 20000 = $2,000 for each future year for ever. stage 1 — identify costs and benefits incurred and value the cost and benefits in each year of the project
stage 1- identify costs and benefits incurred and value the cost and benefits in each year of the project consumers surplus for four parties identified Ferry price(Po)0. 20 A Ferry cost 0. 15 B Existing traffic Generated traff Bridge price 0.00 5.000 25.000 (go) (q1) Crossing per year
Ferry price (P0 ) 0.20 Ferry cost 0.15 Crossing per year Bridge price 0.00 (P1 ) 5,000 25,000 (q0 ) (q1 ) Existing traffic Generated traffic A B C stage 1 — identify costs and benefits incurred and value the cost and benefits in each year of the project consumer’s surplus for four parties identified:
stage 1- identify costs and benefits incurred and value the cost and benefits in each year of the project Future net benefits per year for ever S/yearArea figure 1 假定: Ferry owners 250 A A、B、C都是每年发生的 ·而纳税人的支付(30,000 Existing A+B 是一次性的 consumers 1000 New 的支C consumers 2000 第一天发生;其它支出 taxpayers (-30,000 从一年后开始发生 Society total B+C-(30,000)
stage 1 — identify costs and benefits incurred and value the cost and benefits in each year of the project Future net benefits per year for ever $/year Area in figure 1 Present value at 10% discountrate Ferry owners -250 -A - 2,500 Existing consumers + 1000 A+B +10,000 New consumers + 2000 C +20,000 taxpayers (-30,000) - 30,000 Society total B+C-(30,000) -2,500 假定： • A、B、C都是每年发生的， • 而纳税人的支付（30,000) 是一次性的 • 折现率为10% • 修桥的支付在第一年的 第一天发生；其它支出 从一年后开始发生
Stage 2: Obtain an aggregate "present value of the project ■折现/贴现( discount):考虑时间因素,将未来 的费用和效益值,折算为现值( Present value, PV) Why discount? Time preference(时间偏 好)—人们认为现在的1块钱,要比明年的1 块钱价值大 折现率/贴现率( discount rate)
Stage 2: Obtain an aggregate "present value" of the project ◼ 折现/贴现(discount)：考虑时间因素，将未来 的费用和效益值，折算为现值（Present Value, PV) ◼ Why discount? Time preference (时间偏 好）——人们认为现在的1块钱，要比明年的1 块钱价值大。 ◼ 折现率/贴现率（discount rate)