Review

Lesson 1:
A developing country is implementing a highway project, which has a 20-year life cycle
and is expected to increase the movement of goods between regions by 100,000 tons per
year, from the 4th year onwards. Each ton of goods has a current field value of 800 (in the
country's local currency). The construction of the expressway is also expected to reduce
the number of traffic deaths by 10 per year, from the end of the 4th year of the project.
The economic value of a thousandpeople is estimated to be 500,000 per person.
The investment cost of the project is 300 million, divided equally for the first 3 years of
the project. At the beginning of the 4th year, it is necessary to import domestic equipment
systems that cannot be produced at a cost of 220 million, including a 10% tariff. From the
end of the fourth year, the operating costs of the project include: raw materials 18
million / year, including taxes of 3 million and government subsidies of 2 million
, knowing that inputs increase the amount of input in the market. Labor costs $16 million
a year and the project employs 50 percent ofunemployed workers who are receiving
government unemployment benefits.
1. Tabulate the financial cash flow of the project, calculate the financial value of the
project's NPV if the discount rate is 10%.
2. Establish the economic cash flow of the project, calculate the economic value of
NPV, BCR, IRRof the project. Know the full cost of the project funded from the
government budget. The social discount rate of the project is 5%.
3. Conclusion of the project from the calculation on Lesson 2:
The local government is considering a project to build a new 20-kilometre road to replace
thedeteriorating old road. The newly built road project will bring local people 2 benefits:
saving travel time and reducing the risk of traffic accidents.
The priority cost of the project is VND 500 billion (including compensation costs for
households affected by the project). The project has a construction period of 2 years with
an estimated construction cost of 60 billion VND/year. During the operation period, the
project will need maintenance costs of 1 billion VND/year. To estimate the benefits of the
project, a survey conducted locally gave the following figures:
Trip figures Old roads New road project
Rush hour
 People's Trips 100 140
(per hour)
Trip time (minutes) 60 40
Time value (thousand 0,25 0,25
VND/minute)
Non-peak hours
People's Trips 50 65
(per hour)
Trip time (minutes) 45 35
Time value (thousand 0,11 0,11
VND/minute)
Traffic accidents (per year) 45 25

Know that
- For compulsory travel, project benefits = value of time saved x number of trips
- For new travel created as a result of the project, the benefit = 1/2 of the time saved value
x the increase in the number of trips.
- The potential value of 1 life is 0.8 billion VND
- The social discount rate is 7%. The service life of the project is 20 years (excluding the
construction period).
- The end-of-life value of the project is 300 billion that can be recovered at the end of the
project life if the road is not furtherbuilt.
- There are 1560 peak hours and 7200 non-peak hours per year
Let's evaluate the
project? Lesson 3:
The provincial transport department is considering the plan to build the new road with the
following initial cost:
- Buy 10 tons of building materials. The price per ton is 15 billion VND including tax of
1 billion VND. The Government subsidizes the price of 0.5 billion VND/1 ton
( knowing inputs to replace inputs in the market) - 2 million hours of labor, knowing
 the wage for each hour is 15 000 VND. Workers are 60% unemployed with a rest value
of 8000 VND/hour.
- Completely imported construction machines (domestically not produced) at a cost of
VND 22 billion, including 10% tariff.
During operation, it is necessary to have an annual operating cost of 150 million
VND/year. If this 20-kilometer road is built, thedamage to traffic accidents is estimated to
be reduced by 10 billion VND/year. Save costs for vehicles with the cost of 1 trip is 37
000 VND / 1km and the traffic volume is 8500 vehicles / year.
The project also reduces environmental treatment costs per year from 200 million VNDto
100 million VND / year.
Know that long-term inflation is 3% per year.
The rate of return on government bonds is 8%, the risk level is 2% and the income tax is
20%. On the basis of a cost-benefit analysis, should the project be invested if the life of
the project is
10 years?
Lesson 4:
An agency responsible for administering recreation at the city park. An on-site survey
shows the distribution and demand for sightseeing travel by local visitors over a period of
time as shown in the following table:
Area Average cost of travel Total visits The population regio
(thousand of n
copper/vehicle) (thousand)
A 100 350 5
B 130 240 6
C 160 100 4
D 190 40 2
E 220 20 5
F 250 0 1

Please calculate the number of visitors if the entrance fee to the park is 30,000 VND,
60,000 VND and 90,000 VND respectively. Select any 2 points in the bridge chart,
determine the demand curve equation (assuming a linear demand curve PT), calculate the
consumer surplus with an entrance fee of30 000 VND. Lesson 5:
A project to build a wastewater treatment plant with a capacity of treating 1300 tons of
wastewater / day (operating 350 days / year) with the following information.
- The total cost of construction in year 0 at market prices consists of two components:
+ The cost of hiring 100 workersfor the construction of factories with a market salary of
17000 USD / year, of which 40% of workers are unemployed, knowing the value of rest
is 4000 USD / year.
+ Importing domestically unproduced construction materials with a value of 1.65 million
USD, including a 10% tariff.
- In year 1, the project imported equipment at a price of $1.2 million, but was subject to
an import tax of 20% per price of C.I.F.
- The project's operating expenses (from year 2 to year 20) are $0.9 million per year, of
which $0.1 million is corporate income tax and $0.5 million is fuel and materials tax.
- From year 2, the clean water treated by the project will be reused and sold to a local
water plant for industrial use at $3.50 per ton (assuming0.8 tons of clean water is
collected for every 1 t seal of wastewater after treatment).
- The environmental benefits (fisheries, tourism, and reduced water purification costs by
local water plants) are estimated by experts at $3 per ton of wastewater. - Financial
discount rate and socialdiscount rate are 10% and 8% per year, respectively. a.
Tabulation of financial cash flows and benefit-cost cash flows
b. NPV calculation of 2 points of view
Lesson 6
The dairy market in Hanoi is very competitive. Currently, the price of milk is 25,000
VND/liter, the daily consumption of peoplein the city is 7 million liters. If the price drops
to 15,000 VND/liter, the daily consumption will reach 9 million liters. Suppose a dairy
production project wants to participate and market and will reduce the price in the market
to only 20,000 VND/liter. Let's count:
- The net social benefit of this project?
- Consumer surplus before and after the project? Benefits for all consumers? - What
is the damage to existing dairy factories if they have to sell milk at VND 20,000
per liter? - Suppose that after the new dairy company enters the market, the
 government levies a tax of 2000 per liter of milk sold. Calculating the
government's share of tax revenues and people's share of consumption losses?
Lesson 7
Consider a division of the set of NPV values that can be charged to a mining company.
Mining output Limb recovery fee (Million USD)
(million tons/year)
5 (low) 7 (good) 9 (high)
100 (low) 90
120 (good) 115 110 96
150 (high) 130
- Keep recovery costs at Good: calculate the elasticity of NPV according to output
from good to low, from good to high
- Keep the output at a good level, calculate the elasticity of NPV according to the
cost from good to low, from good to high
- What conclusions will be drawn? Lesson 8:
See the values of NPV of a hydropower project and thermal power project below:
Rate ck (%) NPV (Million USD)
Thermal power Hydropower
4 1170 940
5 950 820
6 800 720
7 680 650
8 590 592
9 520 550
10 460 500
- Graph showing NPV line and discount rate.
- Note the data of hydropower and thermal power projects and indicate: The
crossover value of these 2 options
- What information do we get from the above data to choose an option? Lesson 9:
Oil exploration and processing companies operating in the form of 100% foreign capital
implement oil exploitation projects in Vietnam. The duration of implementation is 2
years. At the beginning of the third year, the project starts operation, expected until the
end of year 15.
- The annual catch reaches 6 million tons / year (starting from the end of year 3), the
price per ton is 550 USD. Suppose marginal incremental output.
- Income tax rate of 30%; The resource tax is 10% by turnover.
The project recruits 100 technical workers in the first 2 years, then from year 3 recruits
100 more. Knowing the unemployment rateis 40%, unemployed workers are currently
receiving unemployment benefits. The salary of workers is 10000 USD / person / year.
- The initial investment cost is 2 billion USD, divided equally over the first 2 years.
- Annual operating costs are $130 million per year
Tabulating the cash flow of the above project throughn CBA points? Calculating the NPV
of the project knows the social discount rate is 7% / year? Lesson 10:
An area of primary forest can be reclaimed for agricultural production or conserved for
scientific research. If demolished, at the beginning of year 1, it will cost an initial
investment of 5000 USD / ha. Agricultural production has an annual turnover of 3000
USD / ha, the annual cost of production is 2000 USD / ha starting from the end of the 1st
year. Know by the annual cost of production is taken from the annual turnover.
If the area is preservedfor scientific research, it is expected to find a cure by the end of 20,
at which time the benefit per hectare is $15,000. The cost of that exploration was $1600
per hectare to test tree varieties and improve the land at the beginning of Year 1.
Know the social security rate is 5% and the period is 20 years.
Choose the option by 3 indicators NPV, BCR and IRR respectively. Give comments on
the results of the selection.