GROUP ASSIGNMENT topic 6 cost benefit analysis for a national park

National Economics University *** GROUP ASSIGNMENT Topic 6: Cost - Benefit Analysis For A National Park Group member Đinh Thúy Quỳnh (Leader) Lê Lưu Thùy Linh Nguyễn Thị Thanh Hằng Lương Mỹ Hạnh Nguyễn Phượng Hiền Nguyễn Quang Vũ Nguyễn Nhật Minh Nguyễn Tiến Đông Nguyễn Chí Thành Class Investment Economics 60 Subject Cost Benefit Analysis Professor TS Hoàng Thu Hà ✦ HÀ NỘI - 2021 ✦ 11184218 11182681 11181524 11181588 11181671 11185622 11183353 11180960 11184481 A NATIONAL PARK Table of Content Option Eco green park I Concept: II Identify Cost-benefit associated with the project III Valuing impacts 2 Option Creative Park I Concept: II Identify Cost-benefit associated with the project III Valuing impacts 9 10 11 Option Sport Park I Concept: II Identify Cost-benefit associated with the project III Valuing impacts 15 15 17 17 Option Astronomical Park I Concept II Identify Cost-benefit associated with the project III Valuing impacts 21 21 23 23 Option Eco green park I Concept: From the entrance of the park, there will be a green path surrounded by trees and grass with statues made from recycled waste, serving visitors to check-in and have a picnic space In addition, visitors can fully enjoy the atmosphere with outdoor activities such as cycling, jogging along the road Picture 1.1 Eco green Park Besides, there are rows of benches so that guests can stop to avoid the sun under the trees and enjoy the atmosphere Moreover, public wastebaskets and propaganda slogans about preserving the environment are indispensable Picture 1.2 Eco Green Park - preserving nature Going straight to the center will be a bridge spanning a canal with two banks of flowers surrounding a greenhouse with a tropical landscape inside and a small lake occupying an empty space at the end of the greenhouse, and the larger space inside is a place to hold events and exhibitions Picture 1.3 Eco Green Park - Flower garden Furthermore, to meet the entertainment needs of visitors as well as to increase profits, the park can sell vending machines so that guests can buy water or fast food II Identify Cost-benefit associated with the project Table 1.1 Cost-benefit analysis Primary benefits Primary costs With market price Non-market price With market price Reduce the cost of air condition Traffic noise production decrease Cost of acquiring Temporary affect the property the living environment of surrounding people (dust, noise pollution) Create income from tourism Create beautiful scene Design and construction cost Reduce stormwater management cost Enhance air quality Operation and maintenance cost Non-market price Create income from events, exhibitions, vending machine Educational and social benefit Reduce the cost of healthcare expenditure The opportunity costs associated with the loss of property tax income that the community would have received if the property had been developed for other purposes Landscaping costs III Valuing impacts Table 1.2 Benefit(annual revenue) No Category The average revenue per year (million vnd) Vending machine 3600 Events, exhibition 1200 Parking 536.55 Public toilet 219 Bicycle rental service 730 Grass skiing service 1314 Children’s playground (sculpture painting, float home ) 3650 Total 11249.55 Table 1.3 Investment capital Cost (million vnd) No Category Construction cost note green-house construction cost is 300 million VND including transparent canopy imported fee is 150 million 2,500 dong (including 10% of tariff) Equipment cost 800 Project management cost 1,000 Construction Investment Consultancy Expense 1,000 Other cost 1,000 including labour cost Contingency expenses 800 Compensation expense 1,000 Total 8,100 100% state capital Table 1.4.1 Investment capital (labor cost) Period No Position Before operation (from year to year 3) After the operation (from year 4 to year 20) Wage person month (million Number VND) per Wage per per person per year (million VND) Wage per year (million VND) Construction Supervisor 108 108 Worker 15 1.5 18 270 Total 16 10.5 126 378 Manager 12 144 144 Sanitation worker 72 216 Security guard 0 Gardener 72 288 Maintenance staff 84 168 Playground staff 72 144 Bicycle rental service staff 72 72 Total 43 516 1032 17 Table 1.4.2 Investment capital (maintenance cost) No Category Cost (million vnd) Parking area 150 Gardening 900 Material facility (include lighting equipment, watering equipment, CCTV, fence, vending machine ) 750 Greenhouse 300 Road 300 Waste treatment 300 Canal cleaning 300 Total 3000 Note the government subsidize 30% in total Table 1.5 The benefits and costs of the project from both private and social perspectives Year Item Private point view Social point view (million VND) (million VND) From year Revenue 11249.55 11249.55 Labor cost 378 378 Greenhouse construction 300 286.36 -> Construction cost 2500 2486.36 -> Investment From 8100 Benefit year to capital year Total 8478 8036.36 Labor cost Cost Maintenance From cost year to year 20 Total 8329.16 1032 825.6 3000 2100 4032 2925.6 Net profit (private pointview) 7217.55 Net profit (social pointview) 8323.95 Table 1.6 The benefit and cost of the non market price Benefit Method Cost of avoidance (avoid the cost of Traffic noise soundproof wall production decrease construction) Annual One time (million VND) (million VND) 30 Beautiful scene Hedonic pricing (increase the value of the land if the nature scene is preserved) 500 Enhance the air Cost of avoidance quality (avoid air purifier) Contingent valuation method (WTP survey) - how much Recreational activity are people willing to (educational and pay for the public social benefit) recreational service 0,4 Cost Annual One time (million VND) (million VND) Method Contingent valuation Temporary affect the (WTA survey) - how living environment much are people of surrounding willing to accept for people (dust, noise the temporary pollution) dust/noise pollution Table Total Cost and Benefit of the Project (Unit: million VND) Year Benefit 0,00 0,00 0,00 11782 11782 11782 11782 20 11782 Cost 8481 8481 2925.60 2925.60 2925.60 2925.60 8481 2925.60 Table 1.8 Real Cost and Benefit (Unit: million VND) Year Nominal benefit CPI Real benefit Nominal Year cost CPI Real cost 0 100.00 0 100.00 0.00 102.00 8481 102.00 8314.71 104.04 8481 104.04 8151.67 106.12 8481 106.12 7991.84 11781.95 108.24 10884.70 2926 108.24 2702.80 11781.95 110.41 10671.28 2926 110.41 2649.81 11781.95 112.62 10462.03 2926 112.62 2597.85 11781.95 114.87 10256.90 2926 114.87 2546.91 11781.95 117.17 10055.78 2926 117.17 2496.97 11781.95 119.51 9858.61 2926 119.51 2448.01 10 11781.95 121.90 9665.30 10 2926 121.90 2400.01 11 11781.95 124.34 9475.79 11 2926 124.34 2352.95 12 11781.95 126.82 9289.99 12 2926 126.82 2306.82 13 11781.95 129.36 9107.83 13 2926 129.36 2261.58 14 11781.95 131.95 8929.25 14 2926 131.95 2217.24 15 11781.95 134.59 8754.16 15 2926 134.59 2173.76 16 11781.95 137.28 8582.51 16 2926 137.28 2131.14 17 11781.95 140.02 8414.23 17 2926 140.02 2089.35 18 11781.95 142.82 8249.24 18 2926 142.82 2048.39 19 11781.95 145.68 8087.49 19 2926 145.68 2008.22 20 11781.95 148.59 7928.91 20 2926 148.59 1968.84 Table 1.9 Net Present value (Unit: million VND) Year Cash flow 20 -8314.71 -8151.67 -7991.84 8181.90 8021.47 7864.19 7709.99 5960.07 0.96 0.92 0.89 0.85 0.82 0.79 0.76 0.46 PV -7994.91 -7536.68 -7104.71 6993.92 6593.06 6215.18 5858.96 2720.10 Accumul ative -7994.91 -15531.59 -22636.30 -15642.38 -9049.32 -2834.14 3024.82 54650.76 Discount rate NPV = 54650,76 (million VND) NPV>0 Option Sport Park I Concept: This is a project to provide public sport space for people of all ages It is expected to enhance citizens' physical as well as mental health, especially for children This park is also famous for being the ideal place to hold team building The main facilities of this park include: - Outdoor space: + Tennis courts, basketball courts, playground for pre-school and schoolaged children + picnic shelters (nearby stream) + Restroom building with all-gender restrooms + A stream where people can join kayak + Water fountain - In-door sport complex + Artificial mountain climbing (for kids, adolescents) + Trampoline jumping + Gym With an area of around 28 hectares, Sports Park anchors the redevelopment of the former tobacco factory, and offers a world class destination for all interests Sports Park will provide high-quality facilities, not only for major events but also for daily enjoyment by the community With a wide variety of sports venues, open spaces, park facilities, retail and dining outlets, it is set to be an urban oasis to meet the diverse needs of the public, and professional and amateur athletes 16 Picture 3.1 Sport Park Design Picture 3.2 Sport Park Main Facilities 17 II Identify Cost-benefit associated with the project Table 3.1 Identify cost-benefit Primary Benefits With market Non price price Primary Costs Market With market Non price price Market - Income Improve the Construction from the local people cost camping health gear rental Temporary pollution - Offer places to Maintenance Provide jobs for exercise no cost people matter what the living weather’s like nearby that day :D Temporary noise pollution - Income Green from kayak atmosphere, rental beautiful scene air Operation cost III Valuing impacts Description: A Foreign company with 100% foreign capital has a project building a sport park in Vietnam with the following data: - Initial investment phase is from year to year 3, operating phase starts from year to year 20 + Construction investment cost in the first years - 1,5 billion yearly + Cost of operation is 55 000 000 VND each year - Annual revenue of the park comes from: + Kayak rents: 50 000 VND/ ticket - on average, 150 kayak tickets are sold each day + Artificial mountain climbing fee: 100 000 VND/ ticket - on average 200 turns per day +Trampoline jumping fee: 100 000 VND/ ticket - on average 150 turns per day + Gym: 50 000 VND/ hour + Parking fee: 5000 VND per motorbike and 20.000 VND per car It is estimated that there are 100 vehicles including 70 motorbikes and 30 cars per day on average + Camping service cost: 50000 VND/ turn - on average 20 turns per day + Tennis court rent: 30000 VND / turn - on average 50 turns each day 18 - Salvage is estimated at 0,5 billion - Profit tax is 20% of the profit - In the first years, 100 labors are hired for the project, and from year 4->20, 100 more laborers are recruited to operate the park + The unemployment rate is 50% (unemployment workers are receiving unemployment benefits) + Wage for each worker is 60 000 000 VND/ year - Assume that year has 360 days Valuation: (For Detailed information, click here) Table 3.2 The Project Revenue (Unit: thousand VND) Number Item Unit Quantity Price (thousand VND) Amount (thousand VND) Ticket 150 50 7500 Kayak rent Artificial mountain climbing fee Ticket 200 100 20000 Trampolin e jumping fee Ticket 150 100 15000 Gym 150 50 7500 Turn (Motorbike ) 70 350 Turn (Car) 30 30 900 Hour Parking fee Tennis court rent Turn 30 50 1500 Service cost 20 50 1000 Turn TOTAL PER DAY 51250 Table 3.3 The benefits and costs of the project from both private and social perspectives (Unit: thousand VND) Year Item Private Social pointview 19 Pointview Benefit Year 4->20 Year 1-3 Cost Unit: VND Year 4->20 Revenue 18450000 Profit tax 1279000 Total 18450000 1279000 Labor cost 6000000 3000000 Investment Capital 1500000 1500000 Total 7500000 4500000 Labor cost 12000000 6000000 Profit tax 1279000 Operation cost 55000 55000 Total 13334000 6055000 Thousand Net profit 6395000 Table 3.4 Valuing indirect impacts (Unit: million VND) Benefit Method Valued by million VND/1ha of land Annual Hedonic pricing (increase the value of the land if the nature Beautiful scene scene is preserved) 500 Contingent valuation (WTP survey) 200 Improve local Contingent valuation (WTP survey) people health 100 Entertainment One time 500 Total Benefit Cost 300 Method Valued by million VND/1ha of land 20 Annual One time Contingent valuation method (willingness to Temporary air accept compensation to pollution live in an environment near a construction site) 100 Contingent valuation method (willingness to accept compensation to live in an environment near a construction site) Temporary noise pollution 50 Total Cost 150 Table Total Cost and Benefit of the Project (Unit: million VND) Year Benefit 0.00 Cost 0.00 0.00 18779.41 18779.41 18779.41 18779.41 18779.41 13334 13334 13334 7550 7550 7550 13334 13334 20 Table 3.6 Real Cost and Benefit (Unit: million VND) Year Nominal benefit CPI Real benefit Year Nominal cost CPI Real cost 0 100.00 0 100.00 0.00 102.00 7550 102.00 7401.96 104.04 7550 104.04 7256.82 106.12 7550 106.12 7114.53 18779.41 108.24 17349.27 13334 108.24 12318.55 18779.41 110.41 17009.09 13334 110.41 12077.01 18779.41 112.62 16675.58 13334 112.62 11840.21 18779.41 114.87 16348.61 13334 114.87 11608.05 18779.41 117.17 16028.05 13334 117.17 11380.44 18779.41 119.51 15713.77 13334 119.51 11157.29 10 18779.41 121.90 15405.66 10 13334 121.90 10938.52 11 18779.41 124.34 15103.59 11 13334 124.34 10724.04 12 18779.41 126.82 14807.44 12 13334 126.82 10513.77 21 13 18779.41 129.36 14517.10 13 13334 129.36 10307.62 14 18779.41 131.95 14232.45 14 13334 131.95 10105.51 15 18779.41 134.59 13953.38 15 13334 134.59 9907.36 16 18779.41 137.28 13679.78 16 13334 137.28 9713.10 17 18779.41 140.02 13411.55 17 13334 140.02 9522.64 18 18779.41 142.82 13148.58 18 13334 142.82 9335.93 19 18779.41 145.68 12890.77 19 13334 145.68 9152.87 20 18779.41 148.59 12638.01 20 13334 148.59 8973.40 Table 3.7 Net present value (Unit: million VND) Year Cash flow -7401.96 -7256.82 -7114.53 5030.72 4932.08 4835.37 4740.56 3664.61 Discount rate 0.96 0.92 0.89 0.85 0.82 0.79 0.76 0.46 PV -7117.27 -6709.34 -6324.79 4300.28 4053.81 3821.46 3602.43 Accumul ative -7117.27 -13826.61 -20151.41 -15851.13 -11797.32 -7975.86 -4373.42 20 1672.48 27369.29 NPV = 27369.29 (million VND) NPV>0 22 Option Astronomical Park I Concept The Astronomical Park has many types of facilities to meet the recreational needs of the community Specifically : - The center of the park is a large lake, in the center of the lake is a statue of President Ho Chi Minh, a world cultural celebrity, connected by many bridges so that people can visit and take photos Surrounding the lake are statues of other cultural celebrities in the world - The park also has an outdoor stage and surrounding seating system, where many events and activities take place Profits can be made through the rental of fairs and exhibitions, thereby maintaining the park's operation Besides, there is also a galaxy square with a simulation model of planets and astronomical phenomena to help visitors have more knowledge about science It is possible to profit through the fact that visitors can hire a tour guide for a more thorough and in-depth explanation of the history of astronomy - The park also has a large observatory Visitors can purchase tickets to have a night out at the park and see the stars in the sky The park also has many trees and benches as well as umbrellas for visitors to rest along the way In addition, the park also has a play area for children and exercise equipment so that residents near the park can come and relax Picture 3.2 Sport Park Main Facilities 23 II Identify Cost-benefit associated with the project Table 4.1 Identify cost-benefit Primary Benefits With market price Primary Costs Non Market price With market price Non Market price Income from event space rental cost Improve the local people health Construction cost Temporary air pollution Income from the sale of picnic Help the neighbors have a place to relax and have fun Maintenance cost Temporary noise pollution Help visitors Management costs More people visit tickets at the observatory Income from the tour guide Income from have more => more waste knowledge => about environmental astronomy impact Labor costs space rental 24 costs (coffee shop, souvenir shop, ) III Valuing impacts Description An enterprise with 35% foreign capital has a project to build an Astronomical Park The construction phase starts in the first years and the project goes into operation from year to year 15 Project revenue comes from: - Coffee shop: on average, 200 bills per day, each bill is 50,000 VND - Souvenir shop: on average, 50 bills per day, each bill is 30,000 VND - Observatory: on average, 200 tickets are sold per day, the fixed price of each ticket is 80,000 VND - Event ground, on average, big events per year, 10,000,000 VND per event - Parking area: 200 vehicles per day on average, of which cars account for 40% Tickets for motorbikes and cars are 5,000 VND and 20,000 VND respectively Profit tax is 25%, resource tax is 7% of the revenue Construction investment cost in the first years is 1,2 billion VND/year The annual operating cost when the project is put into operation is billion VND/year In the first years of construction, the project hires 100 workers and from the 4th year onwards hires another 40 people - The unemployment rate is 20% and all unemployed people think their value of rest is 50 million VND/year - The average salary per worker is 100 million VND/year Assume that year has 360 days Table 4.1 Project Revenue Information Foreign capital 35% Coffee shop/ per day 200 Souvenir shop/ per day 50 bills 0,05 bills 0,03 million VND million VND per bill per bill 25 Event ground Observatory/ per day million VND million VND million VND per event per ticket per ticket million VND per ticket 1000 100 million VND million VND people per year per year from year to year 15 40 people Unemployment rate 20% events 10 200 tickets 0,08 cars 0,02 area/ 40% Parking per day 60% motorbikes 0,005 Profit tax 25% Resource tax 15% of the profit of the revenue Investment cost in first year from year to Operating cost year 15 in first year Labor 1200 Value of rest 50 million VND Average salary per people 100 million VND 360 days year per year per year Valuation: Table 4.2 The benefits and costs of the project from both private and social perspectives (Unit: thousand VND) Year Benefit Year 4-15 Item Private point view Revenue 21492 Unit: million VND Social point view 13969,8 Resource tax 1128,33 Profit tax 1340,9175 Total (per 21492 16439,0475 26 year) Year 1-3 Cost Year 4-15 Labor cost 10000 9000 Investment capital 1200 1200 Total (per year) 11200 10200 Labor cost 14000 12600 Operation cost 1000 1000 Resource tax 1128,33 Profit tax 1340,9175 Total (per year) 17469,2475 13600 Net profit = Revenue - Labor cost - Operation cost - Resource tax =5363,67 IV Non-price impacts Table 4.4 Valuing indirect impacts (Unit: million VND) Benefit Method Valued by million VND/1ha of land Annual One time Gaining knowledge about astronomy Cost of avoidance ( avoid the cost of buy tickets to visit museums or attending astronomical courses ) 100 Beautiful scene Hedonic pricing method ( increase the value of the land if the nature scene is preserved) 500 Improve the air quality Cost of avoidance ( avoid the cost of buying air filtering machines) 500 Entertainment, Contingent valuation 5238 27 Visitor spendings (WTP survey) Land protection Cost of avoidance ( avoid land preservation cost if the land is abandoned) Total benefits Cost 5238 Method 1600 Valued by million VND/1ha of land Annual Noise pollution 500 Cost of avoidance ( avoid the cost of buying sound reduction construction ) One time 500 Table Total Cost and Benefit of the Project (Unit: million VND) Year Benefit 0,00 Cost 11200 Year 10 11 12 13 0,00 11200 0,00 26863,33 11200 17469,25 15 26863,33 26863,33 26863,33 26863,33 17469,25 17469,25 17469,25 17469,25 Table 4.6 Real Cost and Benefit (Unit: million VND) Nominal Real Nominal Year CPI CPI benefit benefit cost 0,00 100,00 0,00 0,00 100,00 0,00 102,00 0,00 11200,00 102,00 0,00 104,04 0,00 11200,00 104,04 0,00 106,12 0,00 11200,00 106,12 26863,33 108,24 24817,57 17469,25 108,24 26863,33 110,41 24330,95 17469,25 110,41 26863,33 112,62 23853,87 17469,25 112,62 26863,33 114,87 23386,15 17469,25 114,87 26863,33 117,17 22927,60 17469,25 117,17 26863,33 119,51 22478,04 17469,25 119,51 26863,33 121,90 22037,29 10 17469,25 121,90 26863,33 124,34 21605,19 11 17469,25 124,34 26863,33 126,82 21181,56 12 17469,25 126,82 26863,33 129,36 20766,23 13 17469,25 129,36 Real cost 0,00 10980,39 10765,09 10554,01 16138,88 15822,44 15512,19 15208,03 14909,83 14617,48 14330,87 14049,87 13774,38 13504,30 28 14 15 26863,33 26863,33 131,95 134,59 20359,05 19959,85 14 15 17469,25 131,95 17469,25 134,59 13239,51 12979,91 Table 4.7 Net present value (Unit: million VND) Year 15 Cash flow -10980,39 -10765,09 -10554,01 8678,68 8508,51 8341,68 8178,12 6979,94 Discount rate 0,96 0,89 0,85 0,82 0,79 0,76 0,56 -9382,48 7418,57 6993,38 6592,55 6214,70 3875,72 -22474,90 -15481,52 -8888,97 -2674,28 PV 0,92 -10558,07 -9952,93 Accumul ative -10558,07 -20511,00 -29893,48 35795,81 NPV = 35795,8 (million VND) NPV>0 29 Conclusion The Cost Benefit analysis shows that the Net present value of Alternative 1, 2, 3, and is 54650,76; -16247,10; 27369.29; and 35795,8 (million VND) respectively Based on the net present value (NPV) of each option, we can see that only project 1, and are expected to generate positive net present value Therefore, only the first, the third and the fourth option are effective projects and are acceptable to be built As the alternative which generates the highest NPV, project - Eco Green Park is the best choice to build a national park 30 ... trees and benches as well as umbrellas for visitors to rest along the way In addition, the park also has a play area for children and exercise equipment so that residents near the park can come and... explanation of the history of astronomy - The park also has a large observatory Visitors can purchase tickets to have a night out at the park and see the stars in the sky The park also has many... VND/year Assume that year has 360 days Table 2.2 Project financial information Foreign capital 40% Coffee shop/ per day 250 bills 0,07 million VND per bill Cinema/ per day 200 Parking area/ 40%