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00:22:530Rubina Canesi: I don't want to tell us if courage is stronger.
00:29:510Rubina Canesi: Yeah, she's here making and to us.
00:54:240Rubina Canesi: see because, I see where it is they don't have inhibition.
01:06:26Rubina Canesi: How much?
01:17:500Rubina Canesi: I'm good to go ahead.
01:25:140Rubina Canesi: most important people are from the world.
01:30:460Rubina Canesi: application.
01:33:61Rubina Canesi: good afternoon, everyone as promised today, we have a Ph Studenti is at the 3rd year of his Phd. Almost
01:47:671Rubina Canesi: the time. This thesis, like writing the 1st chapter of this thesis
01:52:670Rubina Canesi: and so brings brings your laptop off. We're going to use it together. And we are going to implement a health benefit project together.
02:04:580Rubina Canesi: yeah, we are recording the lesson if you want to go back and search for every every step that we are going to take into our excel. And I don't know if you want to, if you want to introduce yourself a bit
02:18:300Rubina Canesi: so welcome. Thank you.
02:21:320Rubina Canesi: I said. I am Franco Korty for dear Phd. Student in this university in the Phd. Course of real estate management my background is on economics. I've studied economics in my master course.
02:34:360Rubina Canesi: This Phd. Is a multidisciplinary Phd. In between economics and engineering. And my research topics are very close to the methods and the topics that you are seeing in this course in particular to the economic and impact analysis and different impact analysis that are
02:54:300Rubina Canesi: addressed in this course. As Professor said, we are going to see today. And in the next next lessons, some examples we'll start from more theoretically simplified ones to see some more applied cases of today. We start from, let's say, cost benefit analysis. And you have recently seen the principles that stay behind this kind of evaluation techniques.
03:24:300Rubina Canesi: And today we will take this example. We're going to fulfill the Excel file together during the lesson to recall some of the concepts that are necessary to perform a cost benefit analysis. Remember that this is a simplified version. In reality, of course, some problems are much more complicated, but behind this reality there are some concepts that is important to understand, to make the, to
03:51:460Rubina Canesi: to understand the complexity of reality. And so the aim of today is to start structure. Some of the calculation that we have already seen in the in the theory to make it in a complete exercise that starts from the beginning to the end. To answer this 1st easy question, which is to calculate
04:11:950Rubina Canesi: the net present value, the irr. The internal rate of return and the benefit cost ratio. To answer to the question, which is the best alternative, which project would we have to choose. In this case
04:25:690Rubina Canesi: it was uploaded. The description of this problem. There are 2 formulation of the taxi. We will start from the 1st one, which will be the most simple as simple as possible to introduce the topic.
04:38:760Rubina Canesi: And we're in front of a a question, a problem of evaluation. And we needed to understand which alternative projects we have to choose according to the creative, the indicators, and some aspects that were presented in represented in the theory.
05:00:250Rubina Canesi: If you recall, we needed to understand multiple alternatives of projects sometimes is also considered the 0 alternative. So the status quo. So what is ongoing right now, in this example we have not considered the status quo the 0 alternative, but we are considering 2 different projects. Project A and project B,
05:24:10Rubina Canesi: as it is described in the exercise. We are talking about a public investment in a waste in a water infrastructure sector. We will see tomorrow a more detailed case of investments. And following this introduction, it is described as some of the characteristics of this project. We will go through each of these values to recall all the elements that are
05:51:440Rubina Canesi: required to perform a cost benefit analysis. Starting from this, we have to remember that the goal of the cost benefit analysis is to identify which is the solution that maximize the social welfare.
06:10:930Rubina Canesi: our context of our situation. And in this case we are talking about a project that has
06:17:960Rubina Canesi: 10 years of horizon before going inside the exercise, I ask you if you have your laptop or possibility to take notes when we are using excel, we have to be careful on some aspects. So which is the language we are using because it affects both the formulas and the sometimes the values. If we are thinking in thousands or other types. If there is a comma or a dot separating our values, so
06:45:640Rubina Canesi: please be careful, because I have used in this case an Italian version, but I will also show you, if necessary, we will check together if it works also in English. So the values of our this is in Italian. This is Excel is in Italian, so I will show you then the formula behind it. But we'll check together if it works also in English, of course, but we also try to calculate all the aspects
07:10:180Rubina Canesi: without the formula to see what it is behind the automated excel formula. So if something is not working. We have to be careful that maybe sometimes there's also a typo on the, on the values that we are inserting in the excel file.
07:25:550Rubina Canesi: So 1st of all, we started to describe our alternative, A, a project, and we will go
07:35:260Rubina Canesi: later to disclose each line of the model. I'll give you the time to insert the value. So we you will be able to calculate the the values by yourself.
07:45:670Rubina Canesi: And then
07:47:20Rubina Canesi: the 1st information we have from Project A is that we're in front of a total initial investment costs to be sustained immediately equal to 15 million euro in year 0.
08:00:30Rubina Canesi: So
08:07:290Rubina Canesi: so 1st of all, we have outline our project.
08:19:660Rubina Canesi: You you don't have this access right now, but I will upload it after the lesson. So let's say, for now I ask you to try to build your own excel, or take notes about it, but you will have the solution afterwards, so you can check it, and you will have the the calculation.
08:35:260Rubina Canesi: So this is a forced exercise. You cannot follow the the solution, but we we have to to do it together. So 1st of all, we have. Be careful that we can use different ways to represent the the different cash flows, the different flows, the different years. So we in this exercise include the years on the horizontal line.
08:56:240Rubina Canesi: And because we have this information of initial investments on the year 0, we have to be careful to consider also the year 0, because it could make a difference when we are thinking about and reasoning about the values during the different timeline, the moments of the flows.
09:13:730Rubina Canesi: And we have these initial investments of 15.
09:29:520Rubina Canesi: Okay.
09:30:930Rubina Canesi: so this 15 million euro year at the 1 million euro in year 0. And we have a total initial investment cost equal to 5 million euro in year one.
09:43:370Rubina Canesi: Remember that in the theory that you have recently listen, there was a description of the different phase of the project.
09:50:160Rubina Canesi: There is a part of the design, a part of construction, and a part of the operating phase of of the project. In this case we have an information that there were.
09:58:310Rubina Canesi: and a flow, of course, in the year 0, and in year one that are necessary to build our project. So let's say that we are in the
10:06:980Rubina Canesi: both design and construction phase. It is a simplified version. So we are in the construction field of our product of our project, and we have a DC 2 value.
10:15:170Rubina Canesi: So in the 1st line, we're gonna insert
10:21:120Rubina Canesi: this information. I put the thousands to simplify the calculation and the 0. But to give you a clearer example. So we have our total initial investment costs that are represented in year 0 as a 15
10:36:740Rubina Canesi: 1 million in the description. But we're going to use thousands
10:39:690Rubina Canesi: and a total investment cost equal to 5 million in year one. So we are start to building the structure of our
10:48:580Rubina Canesi: of our problem.
10:50:580Rubina Canesi: The second information we have, what's that?
10:55:380Rubina Canesi: You type the 10 years close project
10:59:605Rubina Canesi: terminology? Maybe a little bit bigger. Yeah, maybe. Yeah, a little bit more.
11:08:600Rubina Canesi: Yeah, maybe a little bit. Yeah. Sorry.
11:12:650Rubina Canesi: I'll go back and forth to the text. So we're gonna okay. So you see.
11:21:220Rubina Canesi: 15 and 5, the following information we have is that that we have annual revenues
11:30:610Rubina Canesi: equal to 3.7 million, starting from year 2.
11:34:650Rubina Canesi: So remember that we have to. We're in front of a potential investment project that has a construction phase that we are trying to build our infrastructure. Some costs are expected to build this structure in this case it is all considered in this
11:52:140Rubina Canesi: unique voice or unique unique cost element. But you're in front of some potential revenues that in in reality could be represented from some tariffs, some prices that are charged to the people, maybe to access to the services provided by this kind of project. In this case it is a water water.
12:17:40Rubina Canesi: a water infrastructure project.
12:19:510Rubina Canesi: and of course we need that our infrastructure has to be operative. So we have constructed our infrastructure. It is operating, and it starts to provide some revenues because of some tariffs, for example are applied. So then, the following elements that we're going to add
12:37:630Rubina Canesi: to our project, prospector, are some revenues that start from here to okay.
12:50:540Rubina Canesi: I'll give you some time to and type the values inside.
12:57:790Rubina Canesi: And it is considered as an operating operating revenue.
13:03:350Rubina Canesi: So to simplify our calculation, today, I'm gonna insert some. All the values in absolute values. Okay, so we're gonna use the minus and plus function to consider later the cost and benefits
13:15:720Rubina Canesi: the positive and negative effects. But I type here the revenue in absolute value from year 2 to year 10
14:06:680Rubina Canesi: that all everything up, or is it too small pocket?
14:18:290Rubina Canesi: Okay? So everyone is set.
14:22:80Rubina Canesi: The next information we have at is that we have 4.
14:26:520Rubina Canesi: The voice of annual operating costs an amount of one
14:30:260Rubina Canesi: point 2 million of euro I forgot to mention here, but it's in the same case from year 2 to year 10. So when the the infrastructure project is operative.
14:48:200Rubina Canesi: so in a similar way, we are going to consider this operating cost.
14:56:110Rubina Canesi: Remember that in in some problems these operating costs could be represented by different type of operating activities. The maintenance labor costs other operative costs that incur with a yearly basis, for example.
15:15:250Rubina Canesi: and are necessary, of course, to consider the the value of the of our investments in the in the following, in the future years.
15:29:460Rubina Canesi: Okay, so we will start now to introduce also
15:35:550Rubina Canesi: the alternative project B, which is another project with different characteristics, a little bit different characteristics.
15:43:570Rubina Canesi: for example, it required a total investment cost to be sustained immediately equal to 80 million euro
15:51:648Rubina Canesi: in this case is also from year 0. But it doesn't require additional investment costs, for example, in year one. So in this case we have a project that has only one year of construction faded. It is a little bit more smaller, so we have only one year of construction. And the
16:11:640Rubina Canesi: this investment, this infrastructure project, become operative from year one.
16:16:330Rubina Canesi: So we're gonna disclose also some of the lines of Project B,
16:25:160Rubina Canesi: and we have our total investment costs
16:28:290Rubina Canesi: of 18,000 at year 0.