Benefit-Cost Analysis

Benefit-cost analysis, also referred to as cost-benefit analysis, is a method of comparison in which the conse-quences of an investment are evaluated in monetary terms and divided into the separate categories of benefits and costs. The amounts are then converted to annual equivalents or present worths for comparison.

The important steps of a benefit-cost analysis are

       1.   Identification of relevant benefits and costs

       2.   Measurement of these benefits and costs

3.   Selection of best alternative               

4.   Treatment of uncertainty