From this class, we have learned about the cost-benefit analysis involves comparing the costs to the benefits of a project and then deciding whether to go ahead with the project and how to solve cost-benefit related problems.
The costs and benefits of the project are quantified in monetary terms after adjusting for the time value of money, which gives a real picture of the costs and benefits. There are two popular models of carrying out cost-benefit analysis calculations – Net Present Value (NPV) and benefit-cost ratio.
I'm able to calculate cost-benefit related problems.
I have solve the todays class cost-benefit problem. that is given bellow:
Question:
Assume you can lease an item you need for a project for $800/day. To purchase the item, the cost is $12,000 plus a daily operational cost of $400/day. But if you lease the item for more than 29 days you will get the item $500/day for rest of the days. Example; if you lease it in 30th day you need to pay 29*$800+$500=$23700. Now calculate How long will it take for the purchase cost to be the same as the lease cost?
Answer:
It will take 33 days long for the purchase cost to be the same as the lease cost.
For first 29day,
the purchase & operational cost will be 12000+400*29=23600$
& the lease cost will be 800*29=23200$
let days = d.
so the equation is,
23600+400*d = 23200+500*d
=> d=4
total days = 29+4 = 33 days