Cost-Benefit Analysis (CBA) is a systematic approach to evaluating the strengths and weaknesses of alternatives in order to determine the best option in terms of benefits and costs. It involves comparing the total expected costs of a project or decision against the total expected benefits, to determine whether the benefits outweigh the costs and by how much.
Identify Objectives: Clearly define the objectives and scope of the analysis.List Costs and Benefits: Identify all potential costs and benefits associated with the decision or project.Quantify Costs and Benefits: Assign monetary values to costs and benefits where possible.Compare Alternatives: Evaluate different options to determine the most cost-effective solution.Decision Making: Use the results of the analysis to inform decision-making and resource allocation.
Systematic Approach: Provides a structured method for evaluating options.Monetary Valuation: Assigns monetary values to costs and benefits for comparison.Decision Support: Aids in making informed decisions based on quantitative data.Comparative Analysis: Allows for the comparison of multiple alternatives.Risk Assessment: Helps identify and assess potential risks and uncertainties.
Problem Definition: Define the problem or decision to be analyzed.Data Collection: Gather data on all relevant costs and benefits.Valuation: Quantify costs and benefits, assigning monetary values where possible.Analysis: Compare the total costs and benefits to determine the net benefit.Implementation: Use the results to guide decision-making and implement the best option.
Advantages include informed decision-making, efficient resource allocation, risk identification, and the ability to compare different options objectively.
Yes, intangible benefits can be included by estimating their monetary value or using qualitative measures to compare their impact alongside tangible benefits.
