Financial and socio-economic effects of investment in the context of dog population management

Abstract

The modern world faces serious challenges associated with the presence of stray dogs on the streets, especially in urban areas. Vardar Planning Region in North Macedonia, which consists of nine municipalities, experiences such challenges. According to current reports, the number of stray dogs on the streets of cities in this region has increased, which has resulted in an increase in the number of dog attacks on residents. As the existing capacities are small in the registered shelters, we considered the possibility of building a new shelter for stray dogs to meet the needs of this region. The goal of our paper is the evaluation of the financial and socio-economic justifications for the construction of a shelter for stray dogs in the Vardar Planning Region (VPR). The results of the financial justification analysis show that the project does not provide satisfactory financial results. Namely, the Financial Net Present Value (FNPV) is negative, with a value of EUR 75,291. The Financial Internal Rate of Return (FIRR) is 0.57%, lower than the discount rate, which is not acceptable for a private investor. The Financial Benefit–Cost Ratio (FB/CR) of this project is 0.925, suggesting that the total discounted costs are greater than the total discounted revenues. On the other hand, the expected socio-economic benefits from this project are multifaceted, including savings in stray dog bite costs, savings in the cost of traffic accidents caused by stray dogs, and savings in the treatment of diseases caused by stray dogs. The results of the economic analysis show that this investment has full socio-economic justification and that it should be implemented. The Economic Net Present Value (ENPV) is positive and amounts to EUR 789,916. The Economic Internal Rate of Return (EIRR) is 25.94% and the Economic Benefit–Cost Ratio (EB/CR) amounts to 1.90, i.e., greater than 1. The results of the sensitivity analysis also confirm the justification for the realization of this project.