Cost-Benefit Analysis, 7.5 credits

Contents

This course covers basic theory and concepts in cost-benefit analysis (CBA), methods aimed at ensuring that limited resources are used efficiently, first by balancing competing demands between the private and public sectors, and second by prioritizing among different public sector projects. The course starts by presenting the basic welfare and microeconomic foundations of CBA, as well as core concepts that are used throughout the course. It then continues by presenting the different steps included in conducting a CBA in practice.

Valuation principles of output, input and secondary markets are covered as well as how to predict and monetize impacts. Investment decisions often have important consequences that extend over time. Related to the time perspective, the course covers the choice of social discount rate, the principles of discounting, net present value calculations, and the timing of costs and benefits. In the final part of the course, uncertainty and how to deal with it are introduced. How to account for risk and how to perform sensitivity analysis are covered in this part.

Expected learning outcomes

Having completed the course, the student is expected to be able to:

Knowledge and understanding

1. explain the key concepts used in CBA

2. explain the different steps involved in performing a CBA

3. explain the valuation principles of costs and benefits

4. to account for various theories in the selection of the discount rate

5. explain how the timing of benefit and cost, and the presence of risk, affects CBA calculations

Competence and skills

6. use graphical and mathematical tools to assess effects in primary and secondary markets

7. perform present value calculations, and expected present value calculations

8. perform sensitivity analysis

Judgement and approach

9. discuss the welfare theoretic foundations and ethical principles underlying cost–benefit analysis

10. critically assess studies that use cost-benefit analysis

Required Knowledge

22,5 credits in economics and Mathematics 3b/3c or Mathematics Further level 1b or 1c or Mathematics C or equivalent. Proficiency in English equivalent to the Swedish upper secondary course English 6/level 2.

Form of instruction

Learning is supported by classroom teaching and seminars.

Examination modes

The examination consists of an individual written assignment, seminars and an individual written hall exam.

The following grading scale will be used for the course: Pass with Distinction (Väl Godkänd, VG), Pass (Godkänd, G) and Fail (Underkänd, U).

The course grade is based on a summary assessment of the results of the included examinations and is set when the module has finished, and all examinations have been assessed. To receive the grade of Pass (G) for the module, it is required that all examinations are passed.

A student who does not pass the first examination will be offered an opportunity to sit a re-examination within two months. An additional examination opportunity is normally offered every academic year, one week prior to the start of the autumn term. If required by specific circumstances, other forms of examination may be used.

A student that has failed an examination on two occasions has a right to have another examiner or grading teacher appointed, unless there are special reasons against it. A written request addressed to the Director of Studies should be made no later than two weeks before the next examination opportunity.

Exceptions from examination form as stated in the syllabus can be made for a student who has a decision on pedagogical support for disabilities. Individual adaptations of the examination form should be considered based on the student's needs. The examination form shall be adapted within the framework of the expected learning outcomes stated in the course syllabus. At the request of the student, the course responsible teacher, in consultation with the examiner, must promptly decide on the adapted examination form. The decision must then be notified to the student.

Academic integrity and cheating

As a student, you are expected to act with academic integrity. This means writing and presenting within the limits of the academic rules and expectations as communicated in the university's regulations and what is otherwise specified by the responsible department. Disciplinary action may be taken against students who use unauthorized help aids or in some other way try to mislead on a test or on another type of task for examination. Rules and regulations concerning the production of academic texts and correct referencing will be applicable to written assignments. Submitted material may be subject to plagiarism control. In addition, Umeå University rules and regulations for education and research apply.