Cost / Benefit Analysis


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The big picture:

The cost/benefit analysis is based on evaluating quantitatively whether to follow a course of action. This may be useful to avoid in investing a lot of time and money in solving a problem

When to use it:

This technique is widely used for deciding whether to make a change. When employing the technique, one may simply add up the value of the benefits of a course of action, and subtract the costs associated with it. It is worthy to note that some costs are may be one-off, or may be ongoing and benefits are most

How to Use the Tool:

In its simple form, cost-benefit analysis is carried out using only financial costs and financial benefits. For example, a simple cost benefit ratio for a road scheme would measure the cost of building the road, and subtract this from the economic benefit of improving transport links. It would not measure either the cost of environmental damage or the benefit of quicker and easier..