Question

Chapter 10 explains that because of the methods of financing, the absence of tax and profit requirements, and political and social factors, the criteria used in evaluating privately financed projects frequently cannot be applied to public works. The benefit-cost ratio (B-C) has remained a popular method for evaluating the financial performance of public projects. Chapter 11 addresses sensitivity analysis among alternatives to be made or the acceptability of a project to be determined on the variations presented. Discuss and explain how variability best be considered in an engineering economic analysis (i.e., you can discuss sensitivity analysis).

Answer 1

In engineering economic analysis , all the factors U.S.A.ed area unit for the aim of estimating future occurrences and also the estimates of parameters like prices Associate in Nursingd different money flows area unit solely an approximation of reality as a result of the complete future worth can continually differ from the calculable worth as sensitivity analysis tells us however the economic and measures are altered if bound factors area unit varied because it is an endeavor to search out out the uncertainty in parameter estimate.

Sensitivity Associate in Nursingalysis identifies the parameters that have the foremost impact on an economic call because it conjointly tells the amendment in interest if an explicit variable is modified for a specific time. if atiny low amendment in input variable results in an even bigger amendment in output variable then the parameter is termed sensitive to the end result because the sensitivity analysis.

identifies the parameter with the very best sensitivity and also the result on the economic outcome just like the gift worth and since sensitivity analysis cannot vary 2 parameters at a time, thus it's laborious to inform regarding the danger of the project and whether or not amendment in one parameter mitigates the danger in different parameters.