Cost Benefit Analysis

What means cost-benefit analysis?

A cost-benefit analysis is the process of comparing the projected or estimated costs and benefits (or opportunities) associated with a project decision to determine whether it makes sense from a business perspective.

Why is cost-benefit important?

Cost-benefit analyses help businesses weigh pros and cons in a data-driven way so they can make complex decisions in a systematic manner. For a successful CBA, leaders need to identify and project the explicit and implicit costs and benefits of a proposed action or investment.

What is a cost-benefit analysis example?

For example: Build a new product will cost 100,000 with expected sales of 100,000 per unit (unit price = 2). The sales of benefits therefore are 200,000. The simple calculation for CBA for this project is 200,000 monetary benefit minus 100,000 cost equals a net benefit of 100,000.

What are the three steps of cost-benefit analysis?

There are three steps to calculate a cost-benefit analysis, compile the list, give cost and benefit or monetary value, set up the equation, and compare.