Advantage and Disadvantage of ex ante analysis and ex post analysis

Question

From second e-Activity (Parts 1–IV), assume that you submitted your analysis that recommended Project A to your superior. She, however, negated your analysis and chose Project B. Support your recommendation with at least two (2) reasons for accepting the financial implications of Project A. Discuss at least one advantage and one disadvantage of ex ante analysis and ex post analysis.

Sample paper

Advantage and Disadvantage of ex ante analysis and ex post analysis

Ex-ante analysis refers to the prediction or forecasting conducted before establishing all the variables of a particular situation. Ex-ante analysis provides users with a predictive model that takes into consideration any unknown events or conditions that may alter the outcomes of a situation. A major benefit of the ex-ante analysis is that it offers individuals the opportunity to compare various alternatives (Shane, 2009). For instance, an organization may wish to analyze other ways in which a department may achieve similar or better results. Another example is in the analysis is used to evaluate the alternative ways in which funds can be utilized. A disadvantage of ex-ante analysis is the fact that it relies on contemporaneous markets as a basis for evaluation. The assumptions that markets are efficient and that perfect information exists are thus wrong. For example, the market value of a particular asset does not show the present value of the related future cash flows.

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Ex post analysis refers to the analysis of the actual returns of a situation. Ex post analysis can enable organizations to assess the economic impacts of various policies while relying on the evaluation of the economic processes and hypothetical alternatives (Shane, 2009). A major benefit of the ex post analysis is that it is not limited by assumptions found in input-output models. For example, ex post analysis does not rely on linear equation assumptions when relating inputs and outputs across industries. Another benefit is that the analysis gives both direct and indirect impacts, and the induced effects. For instance, in a public project such as a road project, there is bound to be direct and indirect costs. A major drawback is that ex post analysis primarily basis its evaluation on past impacts. For example, the analysis uses past events to forecast the future.

References

Shane, J. M. (2009). What every chief executive should know: Using data to measure police             performance. Flushing, NY: Looseleaf Law Publications.

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