Answer four questions based on some chapters - Essay Example

Task Benefit Cost Analysis Q1 Private Optimization is where the prices are set in such a way to guarantee maximization of the businesses’ profits. The costs are high to allow the investors account for their requirements such as the accounts payables, tax payables, as well long and short-term liabilities. Therefore, the consumer does not benefit because of the high costs, and the investor uses the profit maximization approach in order to get the gross benefit. The Internal Rate of Return of debts along with equity should be superior to the discounting rate given.

Social Optimization is when the costs are set at the market price without considering the liabilities. In this case, either the investor or the consumer may loose depending on the rate of inflation or the rate of demand and supply. The demand and supply forces are equivalent in public optimization; therefore, they meet at equilibrium. The business in this case does not wish to maximize the profits but to get the net benefit. The decision rule is that the project should be accepted if the Internal Rate of Return is greater than the discounting rate.

Q2 A referent group considers the profit of a project in relation to the Investors of the business. The description of a referent group is not dependent on either private or public projects. This is because; it does not consider external debts as well as other liabilities such as loans. It utilizes the opportunity costs as the competence costs to ensure the total profits of a business irrespective of whether it is public or private sector. Therefore, the projects are carried out based on opportunity costs and the benefit cost.

In this case, the projects are accepted once the benefit costs are greater than the opportunity costs. The Net present values should be greater or equal to zero for the project to be undertaken. The costs are set to meet the equilibrium point where the demand as well as supply is satisfied. The prices are also adjusted depending on the rate of inflation or deflation, in order to meet both the business and customer satisfaction. When the market price and the shadow price of inputs and outputs differ, it affects the distribution of the benefits and costs of the products of the company.

In that, if the shadowing price is higher than the market price, there will be less demand hence reduced supply. On the other hand, if the market price is higher than the shadowing price of the company, there will be high demand, thus increased distribution. Q3 It is exceptionally vital to carry out the ‘Efficiency Cost Benefit Analysis’ so as to be able to understand the trends of the market forces. This enables the business to determine the competitive market forces of demand and supply and be able to adjust the prices appropriately.

This analysis helps the company to meet up its cost as well as benefits, also, the benefit of the customer. In this case, the output is equal to the input; therefore, there is equal distribution of cash flows. It therefore ensures that both the existing and additional supplies as well, as demand are contented. Q4 Project BCA analysis deals with the issue concerning debt financing and taxation that are immensely significant in incorporating the pertinent details required. Private BCA shows how the quantity of ICP that assists in determining how it will stand to either lose or lose in all situations.

The efficiency BCA conversely shows the significance of BCA and the ways it has achieved her goals and missions. In analysis, one should use the same discount price to ensure that the scrutiny was performed on the equal grounds, there equal effects. This aids in giving accurate results resulting from precise analysis.