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 make 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
A cost benefit analysis is a metric used to understand the benefits of associated costs. When analyzing business expenses, understanding the direct benefit of your costs can help managers make decisions on where to cut costs or keep them.
Cost Benefit Anlysis Example
How to calculate a cost benefit analysis?
- First, determine the present value of benefits.
Determine and sum all of the present value of benefits.
- Next, determine the present value of costs.
Determine and sum all of the present value of the costs.
- Finally, calculate the cost benefit analysis.
Using the formula above, calculate the 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.