Scribd Logo
Upload

Welcome to Scribd!

  • 26 views

    Cost Benefit Analysis

    Uploaded by

    abhikde
    Cost benefit analysis is an economic evaluation technique that measures all positive and negative consequences of a program. It compares total benefits to total costs to determine if a project's benefits outweigh its costs. The general steps for a cost benefit analysis are to: 1) clearly specify the project, 2) describe project inputs and outputs quantitatively, 3) estimate the social costs and benefits of inputs and outputs, and 4) compare the estimated costs and benefits. Performing a thorough cost benefit analysis is critical for making informed decisions about continuing a development project.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Cost Benefit Analysis

    Uploaded by

    abhikde
    26 views13 pages
    Cost benefit analysis is an economic evaluation technique that measures all positive and negative consequences of a program. It compares total benefits to total costs to determine if a project's benefits outweigh its costs. The general steps for a cost benefit analysis are to: 1) clearly specify the project, 2) describe project inputs and outputs quantitatively, 3) estimate the social costs and benefits of inputs and outputs, and 4) compare the estimated costs and benefits. Performing a thorough cost benefit analysis is critical for making informed decisions about continuing a development project.

    Original Title

    Untitled

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Cost benefit analysis is an economic evaluation technique that measures all positive and negative consequences of a program. It compares total benefits to total costs to determine if a project's benefits outweigh its costs. The general steps for a cost benefit analysis are to: 1) clearly specify the project, 2) describe project inputs and outputs quantitatively, 3) estimate the social costs and benefits of inputs and outputs, and 4) compare the estimated costs and benefits. Performing a thorough cost benefit analysis is critical for making informed decisions about continuing a development project.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    26 views13 pages

    Cost Benefit Analysis

    Uploaded by

    abhikde
    Cost benefit analysis is an economic evaluation technique that measures all positive and negative consequences of a program. It compares total benefits to total costs to determine if a project's benefits outweigh its costs. The general steps for a cost benefit analysis are to: 1) clearly specify the project, 2) describe project inputs and outputs quantitatively, 3) estimate the social costs and benefits of inputs and outputs, and 4) compare the estimated costs and benefits. Performing a thorough cost benefit analysis is critical for making informed decisions about continuing a development project.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 13

    COST BENEFIT ANALYSIS

    BENEFIT COST
    • A benefit is any positive effect • Any negative effect on an
    on the organisation resulting for organisation resulting from the
    the implementation of the implementation of the project.
    project. • Examples:
    • Examples: • Maintenance costs.
    • Increase in productivity. • Environment
    • Reduction in costs. • Research and development.
    • Saving time. • Labour costs.
    WHAT IS COST
    BENEFIT ANALYSIS?
    • CBA is an economic evaluation
    technique that measures all the positive
    (beneficial) and negative (costly)
    consequences of a program.
    • CBA has been established primarily as a
    tool for use by the government in making
    their social and economic decisions.
    • CBA is a decision making device for
    evaluating activities that are not priced by
    the market.
    • CBA attempts to stimulate the market
    result in areas where the market does not
    operate to establish the prices.
    CONCEPT OF CBA
    • The ultimate aim of a business organization is to make profits.
    Therefore, any system in the organization must produce more
    benefits as compared to its costs for the organization to survive.
    • It is a tool which is adopted by modern financial analysts before
    undertaking any financial operation or commercial activity.

    BENEFITS > COSTS


    PRINCIPLES OF CBA

    PRINCIPLE 1 PRINCIPLE 2

    PRINCIPLES
    There must be a common CBA valuations should
    of the measurement. represent Producers or
    Consumers.

    PRINCIPLE 3
    Benefits are usually
    measured by Market
    Choices.
    GENERAL STEPS FOR CBA
    STEP 1: STEP 2:
    Specifying the project Describe quantitatively the
    clearly. inputs and outputs of the
    program.

    STEP 4: STEP 3:
    Compare these benefits and Estimate the social cost and
    costs. benefits of these inputs and
    outputs of the program.
    STEP 1: Specify clearly the project
    • The first step is to decide on the perspective from which the study is to be done.

    • When we have decided on the perspective on the main elements of the projects such as, the
    study of the location, timing, group involved, the connection with other program, etc, should
    be considered.
    • When the project is fixed the following two program are involved:

    1. Physical project: These projects are physical in nature, which is done when an area is
    polluted. E.g.: Public waste treatment plans, hazardous waste removal, etc.

    2. Regulatory project: This project regulates the amount of pollution in the society. E.g.:
    Enforcement of environmental law and regulation, water disposal practice, restrictions of
    land for certain activities, etc.
    STEP 2: Describe quantitatively the inputs
    and outputs of the project.
    • For some projects it is easy to identify the input and output.
    • For eg.,if we are planning a waste water treatment project, the staffs of that program will be
    able to provide a full physical specification of the plant, together with the inputs required to
    build it and keep it running.
    • However, it is harder to predict the externalities caused by the disposition of nuclear
    waste.
    • Because a restriction on development in a particular area can be expected to detect
    development elsewhere into the surrounding areas.
    STEP 3: Estimatethe cost and benefit of these
    inputs and outputs.
    • Put the values on input and output flows.

    (i.e.) to measure costs and benefits.

    Note*: the units should be same.


    STEP 4: Compare these cost and benefit.
    • Comparison between cost incurred and benefit derived from the project.

    (i.e.) TOTAL COST – TOTAL BENEFIT = NET BENEFIT.

    Note*: if net benefit is positive then cost benefit is positive and vice versa..
    DEMERITS MERITS
    1. The government is
    1. The CBC analysis may
    not completely aware
    be applicable for both
    of all the cost and
    the new as well as old
    benefits associated
    projects.
    with the program.

    2. It is based on accepted
    social principle that is
    on individual
    preferences.
    3. This method also
    2. This approach does
    encourages the
    not clearly states that
    development for new
    who should bear the
    techniques for the
    population control
    valuation of social
    cost
    benefits.
    CONCLUSION
    • Performing a CBA is critical to the continuation of a development project.
    • Superficial attention to its development may result in erroneous
    conclusions which will lead a company down a path to disaster.
    • It is important that both costs and benefits be thoroughly defined.
    THANKYOU!!
    Presented By: Simran Aggarwal | MURP-I (2020-22)
    Faculty of Planning, SUPVA

    You might also like