ASSIGNMENT LEC -4

Q: How discount factor play a critical role in cost benefit analysis ?

DISCOUNT FACTOR :

The discount factor of a company is the rate of return that a capital expenditure project must
meet to be accepted . It is used to calculate the net present value (NPV) of future cash flows
from a project and compare this amount to initial investment. The discount factor in this
calculation is the company's weighted average cost of capital .

ROLE OF DISOUNT FACTOR IN COST BENEFIT ANALYSIS :

When a project is started there is some initial cost that incurred in the initial years of the project
and with the time it become less and maintained . The benefits of that project start increasing
with the passage of time . Investor compares the cost with benefits that he ll get after some
time /years . He brings the future benefits on discount rate of Present value and compare that
with the present value of cost . Through this he can decide that whether he should invest or not .

Q: After cost benefit analysis how goals can effectively translated in to measureable indicators ?

 First one might be faced with a simple project that involves a yes- no decision that is the
decision is between doing the project and not doing the project. The criterion we wish to
use is the net benefit criterion.
NB= B-C
 Second, an administrator might be faced with a choice between two mutually exclusive
projects. For example a department might have the choice of building four different
types of bridges but can fund only one. If this is the case, then the general rule is as
follows:
 When choosing one project from a set of mutually exclusive projects, choose the one
with the greatest net benefit.
 Third, an administrator might be faced with a case involving non-efficiency objectives.
For Instance the distributional consequences of the projects in terms of regional
economic development and Unemployment might be of central concern; in such cases
pecuniary effects become relevant.
 Fourth, the administrator might have to select the level at which several projects are to
be operated under a budget constraint. In such cases the rule is to push expenditures for
each project to the point at which the benefit of the last Rs spent is equal to the last Rs
spent on any similar project.

Q:In which way , multi objective model can helpful for decision making in public sector ?
A multi objective model is a decision making technique useful in situations in which there are
moral goals or when one or two goals cannot be quantified. The model decomposes the solution
analysis into three steps:

1. Select Evaluation criteria

2. Decide on the relative importance of each criterion selected

3. Assess each alternative in terms of how well it achieves the criteria.

Q: What are basic steps of system analysis & what are the main objective of simulation ?

SYSTEM ANALYSIS:

It is a process of collecting and interpreting facts , identifying the problems , and decomposition
of system into its components .It is a problem solving technique that improves the system and
ensure all the components of system work efficiently to acomplish their purpose .

Four basic steps of Systems Analysis

1. Problem formulation

The most difficult step in analyzing a system, sometimes requiring three-fourths of the
total effort. This step includes the detailed description of the task and identification of
important variables and their relationships.

In the systems approach, one begins by deciding whether the prime objective is better
service, lower cost, less pollution, or something else. One must also decide what data are
necessary.

2. Modeling

The scene changes in this step: one goes from the real world of the problem to the
abstract world of the modeler. A model is a simpler representation of the real world
problem: it is supposed to help you. Models can be physical reconstructions of the real
thing.

3. Analysis and optimization

In this step an analyst studies the model to find the best strategy for resolving the given
problem. Options include computer simulation and sensitivity analysis.

4. Implementation

SIMULATION:

Simulation is the imitation or representation of one act or system by another.Healthcare

simulations can be said to have four main purposes – education, assessment, research, and health
system integration in facilitating patient safety .
 Simulation  can be used to predict the performance of an existing or planned system and to
compare alternative solutions for a particular design problem. Another important goal
of Simulation in Manufacturing Systems is to quantify system performance .

Q: Which strategy is more reliable to identify best alternative option in public sector in context
of gain & loss ?

Cost benefit analysis is most reliable strategy to identify best alternative in public sector in
context of gain & loss because through that we are able to find that while our investment in this
project will give us profit in future or not . Through Discount Factor we can determine the
Present value of future and that tell us whether this project 'll be beneficial or not .

Class Activity
Q: In the Context of Above Article, Critically Analyze the Four Important Goals of Public
Policy to counter COVID -19

To tackle the Covid-19 crisis, like all countries, Pakistan will have to generate public policy that
balances its efforts, and limited resources across four policy outcomes: First, to limit the spread
of the disease and minimize mortality. Second, to protect the overarching capacity of the public
health system and enable it to cater to the already under-serviced demand for primary, secondary
and tertiary health. Third, to prepare for the economic impact of the Covid-19 crisis on
individuals, families and communities, and on the wider macroeconomic situation at large. And
fourth, to find ways to reach a scientific solution to the Covid-19 crisis, including the search for
R&D that delivers a vaccine and/or drugs to deal with Covid-19. The government has made
some important and difficult decisions that have not received the support they merit. Shuttling
Pakistani students and pilgrims from virus-affected areas in Iran and China was the unpopular
but correct decision. The government needs to be supported in resisting cheap television ratings
driven demands for free movement into the country. The only means of achieving the first policy
goal – limiting infections and minimizing Covid-19 mortality – is social distancing. The second
policy goal is to keep our hospitals and clinics (both public and private) up and running, so that,
for example, pregnant mothers can deliver babies safely, gunshot wounds can be tended to
safely, extreme food poisoning and victims of car accidents can be catered to properly, and
cancer patients can be offered chemotherapy or surgery safely. In short, the public health system
needs capacity to deal with the complexity of all the regular challenges it faces, as the number of
infections of Covid-19 escalate dramatically. This requires, above all, capacity, which requires
two things: money, and preparation. Ventilators require electricity, and technicians and
maintenance staff – an entire array of expenditure that must be designed and approved forthwith.
The third policy goal is to prepare for the economic shock of Covid-19. The depth of the
economic crisis will exceed what happened globally in 2008-2009. The final policy goal of
finding a vaccine is as important as any of the other three.