Business Cost-Benefit Analysis Guide
Methods, steps, factors, and applications.
Analysis Methods
Net Present Value
Description: Discounted cash flow analysis
Outcome: Investment value
ROI analysis
Description: Return on investment ratio
Outcome: Profitability
Break-even analysis
Description: Cost recovery point
Outcome: Risk threshold
Payback period
Description: Investment recovery time
Outcome: Time to profit
Analysis Steps
1. Identify decision options
2. List all costs
3. List all benefits
4. Quantify monetary values
5. Account for time factors
6. Apply discount rates
7. Calculate net benefits
8. Compare alternatives
9. Assess qualitative factors
10. Make informed decision
Cost-Benefit Factors
Direct costs
Type: Quantifiable
Consideration: Explicit expenses
Indirect costs
Type: Estimated
Consideration: Hidden expenses
Tangible benefits
Type: Measurable
Consideration: Concrete gains
Intangible benefits
Type: Subjective
Consideration: Qualitative value
Common Applications
1. Project evaluation
2. Investment decisions
3. Policy assessment
4. Technology adoption
5. Process changes
6. Vendor selection
7. Resource allocation
8. Risk assessment
Cost-Benefit Analysis Checklist
1. Identify decision options clearly. 2. List all costs comprehensively. 3. List all benefits thoroughly. 4. Quantify monetary values accurately. 5. Account for time factors appropriately. 6. Apply discount rates correctly. 7. Calculate net benefits precisely. 8. Compare alternatives systematically. 9. Assess qualitative factors honestly. 10. Make informed decision confidently. Cost-benefit analysis = rational decisions. Options identified. Costs listed. Benefits listed. Values quantified. Time accounted. Rates applied. Benefits calculated. Alternatives compared. Factors assessed. Decision made.