In CBA, assumptions must be made about benefits, costs, the discount rate, and the lifetime of a project. In reality, these assumptions change. For example, in this chapters Sunny Village case study, the discount rate can be lower if the interest rate of the citys long-term debt is lower. The change of assumption inevitably changes CBA results. The type of analysis that examines the impact of assumption change on CBA results is called sensitivity analysis.

1. Now, assume that the discount rate is reduced from 10 percent to 5 percent, and everything else is unchanged conduct a Cost Benefit Analysis for Sunny Villages Diagnostic System.

Table 6.4 Cost-Benefit Analysis for Two Public Infrastructure Projects (S) Year Capital 2 Personnel Project A 0 (the current year) 300,000 150,000 100,000 200,000 100,000 25,000 10 Project B 125,000 25,000 0 (the current year) 500,000 100,000 10 Table 6.4 Cost-Benefit Analysis for Two Public Infrastructure Projects (S) Year Capital 2 Personnel Project A 0 (the current year) 300,000 150,000 100,000 200,000 100,000 25,000 10 Project B 125,000 25,000 0 (the current year) 500,000 100,000 10