Evaluating Projects with the Benefit - Cost Ratio Method - Self liquidating projects
3 important questions on Evaluating Projects with the Benefit - Cost Ratio Method - Self liquidating projects
What is a self-liquidating project?
A governmental project that is expected to earn direct revenue sufficient to repay its cost in a specified period of time. (most of the time providing utility services)
What is a rule for self-liquidating projects (considering cost)?
Self-liquidating projects are expected to earn direct revenues that offset their costs, but they are not expected to earn profits or pay income taxes.
What are things the government can influence taken into consideration public projects? [3]
- Influence market prices with subsidies and special taxes
- Create markets for externalities
- Influence conditions for transactions (allowable pollution levels etc).
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