Private cost savings

The capital market in the United States is distorted by the corporate income tax which increases the before tax return to corporate capital and reduces the before tax return to capital in the remainder of the economy from the level which would prevail in the absence of the taoc. V/hile the private rates of return on capital are used to estimate the expected present value of private cost saving, the social opportunity cost of capital is used to evaluate the expected present value of the social cost savings. 

At the same time, expenditures on pharmaceutical products continue to grow and often outpace expenditures for other consumer products. Pharmaceutical expenditures concern not only consumers, but government payers, private health plans, and employers as well. Generic drugs offer opportimities for significant cost savings over brand-name drug products. 

The private actin contribution calculated in Step 1 is deducted fixim die total project cost to yield the amount the public sector would need to contribute to the total project cost. To these discounted capital costs are added the discounted ongoing costs to calculate the overall public sector costs. Note that the total project cost here is expressed in gross terms. This is in contrast to conventional benefit-cost analysis where capital expenditure which is deemed to be both part of a project but necessary in any event is netted out of the project s capital cost Gross capital cost is assumed in the analysis because the cost savings to the public sector have already been netted out of the ongoing costs. 

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