On behalf of the Education Department in the State of Kingsland, you are required to
undertake and report the findings of a benefit-cost analysis of the PECIP program on a
per-participant basis over the expected lifetime of the participants.
You should calculate IRRs for the market, private, efficiency and referent group
analysis and report NPVs for the referent group on an aggregated and disaggregated
basis for the year 2016 (the present year.) In private CBA analysis, there are two
parties of interest here a) Education department and b) the program participant and
families.
You should also conduct and report the results of a sensitivity analysis in which you
analyse and comment on, at least, the sensitivity of the results to: (i) the expected
earnings of the participant families, and (ii) the assumed value of life in estimating the
health benefits. You are encouraged to explore sensitivity to other variables with a
view to identifying those that have most impact on the results and that would warrant
further investigation.
In the base case scenario, you should summarize the results of the Market, Private,
Efficiency and Referent Group analyses by calculating and reporting IRRs, with the
NPV for the Referent Group reported on an aggregated and disaggregated basis. The
State (and Federal) governments use a 5% discount rate (real) for investment
decision-making, but are interested in knowing the sensitivity of the results at 3% and
7% discount rates. In the scenario analysis, you are expected to test multiple variables
simultaneously in optimistic and pessimistic scenarios.
In your report, you should also indicate other omitted costs and benefits that could be
of potential significance to the decision-maker. Although the Federal Government is
not part of the referent group it is important for the State Government to know what
the overall impact of the project is on Federal Treasury finances as they might want to
build a case for further concessional loans should it be decided to repeat the PECIP
project in the future. Your report should offer advice to State Government in relation
to this issue.
8
Assignment Format and Submission
Two Files to be submitted:
(i) CBA Analysis in Excel Workbook, and; (ii) CBA Report in PDF
i) Excel Workbook
In constructing your CBA spreadsheets you are required to use the template Excel
Workbook downloadable from Blackboard. You should not change the structure of
the template tables in the spreadsheets unless requested by an instructor to do so.
NO ADDITIONAL EXCEL FILES SHOULD BE SUBMITTED.
You are required to enter your name and student ID number in the space provided
at the top of the worksheet in the template Excel Workbook.
You may submit only one Excel Workbook file, containing all relevant spreadsheets
should be formatted in landscape in normal view, and left unlocked so all calculations
can be checked.
Your Excel file must be named: ECO_[your family name]_[your student ID
number]
ii) CBA Report
Your written report should not be more than 10 pages in length, including the
Executive Summary and tables. It should be on A4 size pages (portrait orientation
only) in PDF format, 12-point Times New Roman font, 1.5 spacing, 2.5 margins on
all sides. Penalties apply for excessive length.
The report should provide a Front Page containing name, student number, etc. This is
not included in the page limit. The Report should begin with the Executive Summary
of no more than one page. Results of the base case analyses should be reported in
summary tables included in the text, and where necessary, in more detailed tables in
an Appendix (not included in 10 pages). Do not attach copies of spreadsheets (e.g.
in PDF) to your main report, although sections showing summary results can be
cut-and-pasted into the report.

In the base case scenario, you should summarize the results of the Market, Private, Efficiency and Referent Group analyses by calculating and reporting IRRs, with the NPV for the Referent Group reported on an aggregated and disaggregated basis.
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