Section 6: Cost-Benefit Analysis

6.1 Financial analysis

6.1.1 Definition of Financial Analysis

Financial Analysis includes cost benefit analysis of the project from the organization’s point of
view. For financial analysis the direct benefit from the product and cost of inputs of the project is
required. The life of project and product is considered to calculate financial analysis. The cost
and benefit of the project calculated are as follows:

6.1.2 Investment Cost for Financial Analysis

The total investment for construction project is estimated at Tk. 49399.40Lakh. The investment
cost includes construction cost of Zonal and Ward building and non-building civil works
(approach roads, boundary wall, drain and substation), machinery and equipment, office
equipment, furniture, computers etc. Details are given in Table-6.1.1.

Table-6.1.1: Investment Cost of the Project for Financial Analysis

Main Component Total 1st Fy 2nd Fy 3rd Fy

Revenue 1667.45 291.15 677.65 698.65
Capital 46656.37 28550.27 8205.24 9900.86
PriceContingency 540.52 0.00   540.52
Physical Contingency 535.06 0.00 0.00 535.06
Total 49399.40 28841.42 8882.89 11675.09

6.1.3 Operating Cost for Financial Analysis

The operating cost of the project will be requiring after completion of the project. Generally,
Operating cost of the project is estimated on the basis of recurring cost for operation of the Zonal
and ward Complex Bhaban. As at this moment it is difficult to calculate recurring cost, the
operating cost has been estimated assuming 5% of total project cost. Considering so, it stands at
Tk. 2469.97 Lakh.
6.1.4 Direct Benefit
6.1.4.1 Income from tax collection
After completion of the complex building, DNCC will be able to collect tax. This will be th
direct income of the City Corporation. The per year tax collection estimated Tk. 10087.34.
Details are given in Table 6.1.2.
Table-6.1.2: Direct tax income per year

Particular Zone-6 Zone-7 Zone-8 Zone-9 Zone-10 Total

Income from tax collection            

Total Population 186638 628185 1669095 569469 309058 3362445

Population per family 4 4 4 4 4 4

Av. Holdings 46660 157046 417274 142367 77265 840611

Av. Tax per family per year 1200 1200 1200 1200 1200 1200

Tac collection per year 559.91 1884.56 5007.29 1708.41 927.17 10087.34

6.1.4.2 Income from Car parking, Multipurpose Hall and Health facilities
After the project completion the direct benefit will be from the car parking charge, multipurpose
hall and health facilities. Car parking charge, multipurpose hall and health facilities per year will
be Tk. 507.75 Lakh. Details are given in Table-6.1.3.

Table- 6.1.3 Direct income from Car parking, Multipurpose Hall and Related Activities.

Income from Car parking            

Basement Floor as 3480 3480 2580 4154 4400 18094

parking(sqm)
Car equivalent space 18 18 18 18 18 90
No. of cars 193 193 143 231 244 201
Official car 40% 77 77 57 92 98 402
Private 60% 116 116 86 138 147 603
Rent per car per day 200 200 200 200 200 200
Rent per car per month 1160000 1160000 860000 1384666.7 1466666.7 1206266.7
Rent from car per year in 139.2 139.2 103.2 166.16 176 144.752
Lakh taka
             
No. of Health Facilities 5 5 4 4 5 23
space
No. of people getting health 100 100 100 100 100 500
facilities per month
Service Charge per person 50 50 50 50 50 250
 Service Charge per month 25000 25000 20000 20000 25000 2875000
Service Charge per year 3.00 3.00 2.40 2.40 3.00 345.00

             
Multipurpose Hall 5 5 4 4 5 23

Service Charge per month 30000 30000 30000 30000 30000 30000

Service Charge per year 3.60 3.60 3.60 3.60 3.60 18.00

Total 507.75

6.1.5 Result- Financial Analysis

Financial analysis is the process of evaluating projects, businesses, budgets and other finance-
related entities to determine their suitability for investment. Typically, financial analysis is used
to analyze whether an entity is stable, solvent, liquid, or profitable enough to be invested in. It
also compares the costs and benefits over time to determine whether a project is profitable or not.

Financial analysis was done on the basis of available data. The Net Present Value (NPV) was
found Taka 38852.82 Lakh, Benefit-Cost Ratio was 1.60 and Internal Rate of Return was 21.59.
The project is not profitable because NPV is positive, BCR is more than 1 and IRR was greater
than 12%. From the above statement it can be say that the project is financially viable. Details
are given in Table-6.1.5 and Annex-A.

 Table 6.1.5: Financial Analysis

Sl.No. Parameters Unit Results

1 Net Present Value (NPV) at 12% discount Lakh BDT 38852.82
rate
2 Benefit-Cost Ratio (BCR) at 12% Ratio 1.60
discount rate
3 Internal Rate of Return (IRR) Percetage] 21.59
6.2 Economic Analysis

6.2.1 Definition of Economic Analysis

Economic Analysis includes cost benefit analysis of the project from the social point of view.
For economic analysis the direct and indirect benefit from the product and cost of inputs of the
project is required. The life of project and product is considered to calculate economic analysis.
The cost and benefit of the project calculated are as follows:

6.2.1 Investment Cost for Economic Analysis

The total investment for construction project is estimated at Tk. 79622.99 Lakh. The investment
cost includes construction ofzonal and ward complex, Boundary Wall, Drainage, Buildings, But
price contingency and physical contingency are not included. Details are given in Table-6.2.1.

Table-6.2.1: Investment Cost of the Project for Financial Analysis

Main Component Total 1st Fy 2nd Fy 3rd Fy

Revenue 1667.45 291.15 677.65 698.65

Capital 46656.37 28550.27 8205.24 9900.86
Total 49399.4 28841.42 8882.89 11675.09

6.2.2 Operating Cost for Financial Analysis

The operating cost of the project will be requiring after completion of the project. Generally,
Operating cost of the project is estimated on the basis of recurring cost for operation of the Zonal
and ward Complex Bhaban. As at this moment it is difficult to calculate recurring cost, the
operating cost has been estimated assuming 5% of total project cost. Considering so, it stands at
Tk. 2469.97 Lakh.

6.2.3 Direct Benefit

6.2.3.1 Income from tax collection
After completion of the complex building, DNCC will be able to collect tax. This will be th
direct income of the City Corporation. The per year tax collection estimated Tk. 10087.34.
Details are given in Table 6.2.2.
Table-6.2.2: Direct tax income per year

Particular Zone-6 Zone-7 Zone-8 Zone-9 Zone-10 Total

Income from tax collection            

Total Population 186638 628185 1669095 569469 309058 3362445

Population per family 4 4 4 4 4 4

Av. Holdings 46660 157046 417274 142367 77265 840611

Av. Tax per family per year 1200 1200 1200 1200 1200 1200

Tac collection per year 559.91 1884.56 5007.29 1708.41 927.17 10087.34

6.2.3.2 Income from Car parking, Multipurpose Hall and Health facilities
After the project completion the direct benefit will be from the car parking charge, multipurpose
hall and health facilities. Car parking charge, multipurpose hall and health facilities per year will
be Tk. 507.75 Lakh. Details are given in Table-6.2.3.

Table- 6.2.3 Direct income from Car parking, Multipurpose Hall and Related Activities.

Income from Car parking            

Basement Floor as 3480 3480 2580 4154 4400 18094
parking(sqm)
Car equivalent space 18 18 18 18 18 90
No. of cars 193 193 143 231 244 201
Official car 40% 77 77 57 92 98 402
Private 60% 116 116 86 138 147 603
Rent per car per day 200 200 200 200 200 200
Rent per car per month 1160000 1160000 860000 1384666.7 1466666.7 1206266.7
Rent from car per year in 139.2 139.2 103.2 166.16 176 144.752
Lakh taka
             
No. of Health Facilities 5 5 4 4 5 23
space
No. of people getting health 100 100 100 100 100 500
facilities per month
Service Charge per person 50 50 50 50 50 250
Service Charge per month 25000 25000 20000 20000 25000 2875000
Service Charge per year 3.00 3.00 2.40 2.40 3.00 345.00
             
Multipurpose Hall 5 5 4 4 5 23
Service Charge per month 30000 30000 30000 30000 30000 30000
 Service Charge per year 3.60 3.60 3.60 3.60 3.60 18.00
Total 507.75

6.2.4 Intangible Benefits

6.2.4. Income from Rent Saving from Office Space

Rent saving            

Office room space 8132 8132 5280 9899 10316 41759

Rent per sqm per month 200 200 200 200 200 200

Rent per month 1626400 1626400 1056000 1979800 2063200 8351800

Rent per month in lakh Taka 16.26 16.26 10.56 19.80 20.63 83.52

Rent per year in lakh Taka 195.17 195.17 126.72 237.58 247.58 1002.22

6.2.5 Income from Time Saving

Time saving            
Total Population 186638 628195 166095 569469 309058 1,859,455

Av. Household 46660 157049 41524 142367 77265 464864

Service receivers per day 2333 7852 2076 7118 3863 23243
Before project            
Distance from home 7.50 6.50 10.00 5.50 10.00 39.50

Time required to come to office 75 65 100 85 90 415

(minutes)
Time required to back from office 75 65 100 85 90 415
(minutes)
Total time required per person 150 130 200 170 180 830
After project            
Time required to come to office 50 40 60 60 4 214

Time required to back from office 40 35 55 45 45 220

Total time required per person 90 75 115 105 49 434

Time saving per service receivers 60 55 85 65 131 396
Time saving all service receivers 139979 431884 176476 462694 506082 9204302
per day
Time saving all service receivers 4199355 129565219 5294278 138808069 15182474 2761290675
per year 0 1 3
Hour 699893 2159420 882380 2313468 2530412 46021511
Day 87487 269928 110297 289183 316302 5752689
 Wage per day per labour 300 300 300 300 300 300
Total money from time saving 262.46 809.78 330.89 867.55 948.90 17258.07

6.2.5 Result- Economic Analysis

Economic analysis takes into account the opportunity cost of resources employed and attempt to
measure in monetary terns the social cost and benefits of a project to the community or economy.

Economic analysis was done on the basis of available data. The Net present Value (NPV) as
found Taka 307757.82 lakh, Benefit-Cost Ratio 4.96 and Internal Rate of Return 39.29. The
project is profitable because NPV was positive, BCR was more than 1 and IRR was more than
12%. From the above statement it can be say that the project is economically viable. From social
point of view Details are given in Table 6.2.6 and Annex-B.

Table 6.2.6: Economic Analysis

Sl.No. Parameters Unit Results
1 Net Present Value (NPV) at 12% discount rate Lakh BDT 307757.82
2 Benefit-Cost Ratio (BCR) at 12% discount rate Ratio 4.96
3 Internal Rate of Return (IRR) Percetage 39.29