I believe you meant “Cost-Benefit Analysis.” Cost-Benefit Analysis (CBA) is a systematic approach used to evaluate the potential benefits and costs associated with a decision, project, or policy.
Get the full solved assignment PDF of MGSE-001 of 2023-24 session now.
It involves quantifying and comparing the positive and negative aspects to determine whether the benefits outweigh the costs.
Key steps in a cost-benefit analysis include:
- Identifying Costs and Benefits: Enumerate all relevant costs and benefits associated with the decision or project.
- Assigning Monetary Values: Assign monetary values to each cost and benefit whenever possible. This allows for a quantitative comparison.
- Time Adjustment: Adjust the values over time, considering factors like inflation and the time value of money.
- Discounting Future Values: Assign lower value to future costs and benefits, recognizing the principle that a unit of currency today is worth more than the same unit in the future.
- Calculating Net Present Value (NPV): Subtract total costs from total benefits, adjusting for the time value of money. A positive NPV indicates that the benefits outweigh the costs.
- Sensitivity Analysis: Assess the impact of changes in assumptions or external factors on the analysis to account for uncertainties.
Cost-Benefit Analysis is widely used in decision-making processes across various sectors, helping stakeholders make informed choices by providing a quantitative basis for evaluating alternatives and assessing the economic viability of a given decision.