Enter the sum of the present value of all expected benefits and the sum of the present value of all associated costs. The calculator will evaluate and display the cost-benefit.

## Cost Benefit Analysis Formula

The following equation can be used to calculate a cost-benefit analysis.

Cost-Benefit = Sum of Present Value of Expected Benefits/ Sum of the present value of associated costs

It’s important to note that this calculator uses the present value of the benefits in costs. This is to take into account their current values instead of future values, which can be harder to determine.

## Cost Benefit Analysis Definition

Cost Benefit Analysis (CBA) is a decision-making tool that evaluates the potential costs and benefits of a project or action to determine its overall value.

CBA involves comparing the total costs associated with a particular course of action to the total benefits it is expected to generate. By quantifying and comparing the costs and benefits, CBA enables individuals and organizations to make informed choices.

CBA is crucial as it provides a systematic approach to assess the feasibility and desirability of a proposed project or policy. It helps in determining whether the benefits of undertaking an action outweigh the costs associated with it.

This analysis allows decision-makers to prioritize projects based on their impact and efficiency, ensuring the allocation of limited resources to the most beneficial endeavors.

The key advantage of CBA is its ability to provide a standardized framework for decision-making. It allows decision-makers to compare different options and objectively assess their value.

CBA also enables transparency and accountability in decision-making by providing a clear rationale for the chosen course of action.

## Cost Benefit Analysis Example

How to calculate a cost-benefit analysis?

1. First, determine the present value of benefits.

Determine and sum all of the present value of benefits.

2. Next, determine the present value of costs.

Determine and sum all of the present value of the costs.

3. Finally, calculate the cost benefit analysis.

Using the formula above, calculate the cost-benefit analysis.

## FAQ

What is a cost benefit analysis?

A cost-benefit analysis is a numerical way to determine the financial ratio of the cost and benefits of a proposed project.