A cost benefit analysis (also known as a benefit cost analysis) is a process by whichorganizations can analyze decisions, systems or projects, or determine a value forintangibles. The model is built by identifying the benefits of an action as well as theassociated costs, and subtracting the costs from benefits. When completed, a costbenefit analysis will yield concrete results that can be used to develop reasonableconclusions around the feasibility and/or advisability of a decision or situation:(1) Make reference to any organisation of your choice as a case study of thefirm's products, to discuss, how you can apply Social Cost Benefit Analysisto arrive at the decision rule in your strategic thinking; and(2) Critically discuss steps in Cost Benefit Analysis.

Cost-benefit analysis embodies a methodical and numerical approach utilized to assess the viability…

Answered: A cost benefit analysis (also known as…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Ruka construction Company is considering bidding on a contract for a new office building complex. First company manger must decide whether to bid on the contract or not. The cost of preparing the bid is $20,000. The company has a 0.75 probability of winning the contract if it submits a bid. If the company wins the bid, it will have to pay $1,500,000 to become a partner in the project. The company will then consider doing a market research study to forecast demand prior to beginning construction. The cost of this study is $100,000. The possible outcomes of the market research study show there is 45% for high interest and 35% for moderate and 20% for low interest for office building. The manager of the company regardless of the result of market study or even without doing market study should decide whether to build the complex or to sell the rights in the project to another developer. If company decides to build the complex, cost of building will be $10,000,000. Based on market study…
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A drug company has two options when it comes to drug development. Develop a new drug or improve an existing one. When developing a new drug the company can choose to go with rapid development, which costs less but has a larger chance of failing FDA inspection, or choose to go with thorough development, which is costlier but has a better chance of FDA approval. If the company chooses to improve an existing drug then the company can either choose to do minor improvements to the drug or major improvements to the drug. Major improvements have to be FDA approved while minor improvements don’t have to be approved by the FDA. The company needs to figure out the optimal decision process. Based on projected demands the payoffs are as follows; if a new drug is developed rapidly, then, approval by FDA will result in a profit of 75,000 while rejection by FDA will result in a loss of 25,000. If a new drug is developed thoroughly, then approval by FDA will result in profit of 105,000 while…

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