Policy Memorandum Cost-Benefit Analysis (CBA) Template Institute for Public Policy Studies (IPPS) Name: Andy Sherbo Alternative #1: Supermax Prison (Example) Date: February 9, 2009
Title of Policy Memorandum: CBA Example
Constant 2008 Dollars
Advisor: Dr. Caldwell
Year Cost Description 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Start-Up
Cost $ $526,600
PV Cost $
PV Benefit $
Benefit Description Benefit $ $0
$0
1.000
$336,600
Medical Savings, etc.
$640,000
$598,400
0.94
$314,280
"
$640,000
$558,720
0.87
$360,000
$293,760
"
$640,000
$522,240
0.82
"
$360,000
$274,680
"
$640,000
$488,320
0.76
"
$360,000
$256,680
"
$640,000
$456,320
0.71
"
$360,000
$239,760
"
$640,000
$426,240
0.67
Personnel Costs, etc.
$360,000
"
$360,000
"
$526,600
7% Discount
"
$360,000
$224,280
"
$640,000
$398,720
0.62
"
$360,000
$209,520
"
$640,000
$372,480
0.58
"
$360,000
$195,840
"
$640,000
$348,160
0.54
"
$360,000
$182,880
"
$640,000
$325,120
0.51
"
$360,000
$171,000
"
$640,000
$304,000
0.48
"
$360,000
$159,840
"
$640,000
$284,160
0.44
"
$360,000
$149,400
"
$640,000
$265,600
0.42
"
$360,000
$139,680
"
$640,000
$248,320
0.39
"
$360,000
$130,320
"
$640,000
$231,680
0.36
"
$360,000
$122,040
"
$640,000
$216,960
0.34
"
$360,000
$114,120
"
$640,000
$202,880
0.32
"
$360,000
$106,560
"
$640,000
$189,440
0.3
"
$360,000
$99,360
"
$640,000
$176,640
0.28
"
$360,000
$92,880
"
$640,000
$165,120
0.26
$12,800,000
$6,779,520
Total $ Net Present Value $ Benefit-Cost Ratio Internal Rate of Return (IRR) Discounted Payback Period in Years
$7,726,600
$4,340,080
$2,439,440 1.56 53.16% 3.55
Notes: (1) Input data in only columns D and H, green highlighted area. Simply override numbers in the Example. (2) Spreadsheet automatically computes Net Present Value (NPV), Benefit-Cost Ratio, IRR, and Discounted Payback Period. (3) You may need to add together certain Costs and Benefits as there is one line per year for this data for each year. Just keep track of your numbers and how you added these together for input on the Spreadsheet. Use brief descriptions. (4) Be sure to adjust all cash flows to 2008 Dollars when using the OMB Circular A-94 Real Discount Rate of 7%.