Determining Cost Benefit Analysis and Effective Project to Invest (Essay Sample)
Determine the cost benefit analysis for the two projects and select the effective project to invest.
Scenario 1: Manchester housing company plans to build 200 homes and rent out 25 units for five years at £3,500 a year, after which the rented units can be sold for £70,000. The construction costs of each home will be £70,000. They can sell remaining homes at £110,000 per unit. Scenario 1 financing costs £1,500,000 every year. The salaries of the sales personnel for a year will cost £150,000, and the office costs will cost £2,000,000.
Scenario 2: Manchester housing company plans to build 300 homes and rent out 50 units for ten years at £3,000 a year, after which the rented units can be sold for £60,000. The construction costs of each home will be £80,000. They can sell remaining homes at £100,000 per unit. Scenario 2 financing costs £2,000,000 every year for two years. The salaries of the sales personnel for a year will cost £200,000, and the office costs will cost £1,000,000.
Cost-Benefit Analysis
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Cost-Benefit Analysis
Cost-benefit analysis can be described as a process in which a business uses analysis to evaluate decisions to make and others that it will forgo (Sunstein, 2016). The cost-benefit analysis technique is mainly used to determine the course of action an organization will take, the value of intangible benefits, and the opportunity cost calculation. The opportunity cost can be described as the business's loss when choosing one alternative over the other.
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