A Cost/Benefit analysis is the process of comparing the projected or estimated costs and benefits associated with a project decision. This Cost/Benefit analysis could be used to evaluate opportunities as well.
This simple Cost/Benefit Analysis provides for a quantitative evaluation.
Steps to Perform the Analysis
- Sum all costs over the payback period, 1 year for example
- Sum all benefits over the payback period stated above, 1 year
Formulas for Analysis
Total Benefit = Benefits – Costs
Payback Time = Costs / Benefits
Key Points
- Powerful
- Easy to do