Economic benefits of investing in projects
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  • 1. ECONOMIC BENEFITSOF INVESTING INPROJECTS EP JOHN I MBA B SEC 11397044
  • 2. WHAT ARE ECONOMICIMPACTS? Business output (or sales volume) Value added (or gross regional product) Wealth (including property values) Personal income (including
  • 3. HOW SHOULD ECONOMICIMPACTS BE MEASURED? Total employment Aggregate personal income Value added Business output
  • 4. HOW DO ECONOMIC IMPACTS OCCUR? Investment and spending decision Cost shift Location competitiveness indirect business impacts induced business impacts
  • 5. HOW SHOULD THESTUDY AREA BEDEFINED? The area of jurisdiction for the sponsoring agency The area of direct project influence Interest in distributional impacts on a sub-area Interest in external area consequences
  • 6. WHEN AREMULTIPLIERS USED? Output multiplier for a given industry in a given area= Total overall increase in dollars of business output for all industries per dollar of additional final demand (purchases) of the given industry Job multiplier for a given industry in a given area= Total overall increase in jobs for all industries per new job created in the
  • 7. WHAT ARE THEOPTIONS FORECONOMIC MODELING? Input/output (I/O) ModelsI/O Models can be used directly to estimate the full income and job effects of changes in business activity levels (e.g., plant closings and new plant openings), and with "demand translator" (budget breakdown) tools, to also estimate the effects of changes in spending
  • 8. WHAT ARE THEOPTIONS FORECONOMIC MODELING? Economic Simulation ModelsSimulation Models, like I/O Models, can be directly applied to estimate the full income and job effects of business location, industry activity and spending shifts. Unlike I/O models, they may also be used to estimate the further effects over time of changes affecting relative costs, prices, productivity, business competitiveness, and population in/out migration. However, economic simulation models involve more analytic sophistication and cost more to acquire than the input/output
  • 9. HOW ISBENEFIT/COSTANALYSIS APPLIED? Feasibility Cost Effectiveness Net Present Value (NPV) Benefit/Cost Ratio (B/C) Calculation of Present Value
  • 10. THE SEVEN DEADLY SINSOFECONOMIC IMPACTSTUDIES1. Confusing the economic role (gross effect) of a facility or project from its net impact on the economy of an area;2. Adding together different measures of the same economic change (e.g., changes in business sales and personal income);3. Confusing study areas (e.g., neighbourhood, citywide, state and national effects);4. Confusing time periods (e.g., immediate
  • 11. THE SEVEN DEADLY SINSOFECONOMIC IMPACTSTUDIES5. Assuming that a facilitys capacity and its actual level of activity are the same;6. Applying multipliers in situations where they dont apply;7. Ignoring market effects on wages and land/building costs, which can also affect the economic competitiveness of an area.
  • 12. THANK YOU