Question

In cost benefit analysis, which of the following best explains why benefits and costs are all discounted?

Select one:

a. It makes it easier to compare options

b. It is a requirement in project evaluation

c. It ensures the project is feasible

d. Money today is not the same as money tomorrow

e. None of the above

Which of the following statement is true of social cost benefit analysis?

Select one:

a. All benefits and costs need to be discounted before adding or subtracting

b. All direct and indirect impacts should be included

c. Include only impacts that affect the well-being of individuals

d. All of the above

e. None of the above

Answer 1

Answer-1. Correct option is 'a'

In cost benefit analysis, it makes it easier to compare options. Cost Benefit Analysis has two main applications: To determine if an investment is sound, ascertaining if, and by how much, its benefits outweigh its costs. To provide a basis for comparing investments, comparing the total expected cost of each option with its total expected benefits. Discounting is the process of determining the present value of a payment or a stream of payments that is to be received in the future. Given the time value of money, a dollar is worth more today than it would be worth tomorrow. Discounting is the primary factor used in pricing a stream of tomorrow's cash flows.

Answer-2. Correct option is 'c'

Social cost benefit analysis include only impacts that affect the well-being of individuals. A cost-benefit analysis (CBA) is the process used to measure the benefits of a decision or taking action minus the costs associated with taking that action. A CBA can also include intangible benefits and costs or effects from a decision such as employee morale and customer satisfaction.