Module 4 Flashcards
What is a cost benefit analysis
It compares all the financial costs of completing the project against all benefits associated with completion
What is the payback period
It is equal to the number of years it takes to pay back the original financial investment
What is the calculation for payback period
Payback period = investment / annual benefit
What is the time value of money concept
The value of money today is not the same as the value of money in a future period
What is the equation for an interest rate?
IR = (future value / present value) -1
How do you calculate the present value of money?
PV = FV / (1+ IR)^n
Where n = # of years
What is NPV
Net present value
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What is a better interest rate; 15% or 10%
10% think of it like inflation
Why do corporations need to evaluate competing activities
Since they have limited financial resources and organizations are motivated to make the best use of the resources the have under their control
What is a concerned associated with the application of cost-benefit analysis to some env projects
It is very difficult to convert benefit into financial terms.
It’s hard to put a monitory value on the clean up of a contaminated site
