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Cost–benefit analysis (CBA), sometimes also called benefit–cost analysis, is a systematic approach to estimating the strengths and weaknesses of alternatives.It is used to determine options which provide the best approach to achieving benefits while preserving savings in, for example, transactions, activities, and functional business requirements. [1]
A benefit–cost ratio [1] (BCR) is an indicator, used in cost–benefit analysis, that attempts to summarize the overall value for money of a project or proposal. A BCR is the ratio of the benefits of a project or proposal, expressed in monetary terms, relative to its costs, also expressed in monetary terms.
Cost–benefit analysis (CBA) is a systematic approach to estimating the strengths and weaknesses of alternatives (for example in transactions, activities, functional business requirements); it is used to determine options that provide the best approach to achieve benefits while preserving savings. [1]
A literal understanding will connect it with a "spare no expense" doctrine which prescribes the acquisition of the best state of the art technology available, without regard for traditional cost-benefit analysis. [1] In practical use, the cost aspect is also taken into account. [2] See also discussions on the topic of the precautionary ...
The term "option value" and its theoretical underpinnings as a non-user benefit were initially developed in 1964 by Burton Weisbrod. [12] It was posited as an element of benefit distinct from the traditional concept of consumer surplus, and it depended on three factors: (1) uncertainty about future need for the asset, (2) irreversibility or high cost of replacement if the asset is lost, and (3 ...
Finally, cost-benefit or cost-efficiency analysis assesses the efficiency of a program. Evaluators outline the benefits and cost of the program for comparison. An efficient program has a lower cost-benefit ratio. There are two types of efficiency, namely, static and dynamic.
Least-cost planning methodology (LCPM), also referred to as least-cost planning (LCP) is a relatively new technique used by economists for making rational decisions about investments in transport and other urban infrastructure projects. It is based on cost–benefit analysis. However, it is more comprehensive in that it looks at not only the ...
The appropriate selection of a social discount rate is crucial for cost–benefit analysis, and has important implications for resource allocations. There is wide diversity in social discount rates, with developed nations typically applying a lower rate (3–7%) than developing nations (8–15%).