Objectives for this session
  • At the end of this session you should be able 
   to:
   –Describe the meaning of net present value, 
    benefit-cost ratio and internal rate of return
   –Interpret the results of a cost-benefit analysis
   –Implement a simple cost-benefit analysis
        Role of economic analysis
   • Economic value (benefit) is only one factor in making 
    decision about a proposed program
   • May be other reasons to go ahead with uneconomic 
    program 
    –For example public health concerns such as for Rabies
   • Or to not go ahead with program with a high NPV or 
    benefit-cost ratio
    –For example political reasons, financial reasons (lack of funds), 
     other priorities more important
   • Decision maker will consider all of these factors to make a 
    decision
   What is a cost-benefit analysis?
  • Compares costs and benefits of a program over 
   multiple years
  • Takes account of fact that money spent or 
   received in the future is worth less than money 
   spent/received today – why?
  • All costs and benefits discounted (depreciated) to 
   current year value for comparison = Present value
  • Discount (depreciation) rate similar to interest 
   that would be earned if money was invested
  • Usually for:
   –larger and more complicated programs
   –Programs that run over multiple years (5 or 10, up 
    to 20 years)
   –Programs where costs are higher at the start and 
    benefits higher at the end
                 Inputs
   • Costs of the program
    –Fixed costs 
      • capital equipment, 
      • staff, 
      • Vehicles
      • Office rent. electricity
    –Variable costs 
      • Surveillance costs, 
      • control costs, 
      • per diems, travel
   • Need to be calculated separately for each year of the 
    program