Cost-Benefit Analysis Calculator
Calculate net present value, benefit-cost ratio, and payback period for a project or investment decision using CBA methodology.
What Is Cost-Benefit Analysis? Cost-Benefit Analysis (CBA) is a systematic method for comparing the total expected costs and benefits of a project or decision. It is widely used in public policy, infrastructure planning, business investment, and environmental regulation.
Key Metrics Net Present Value (NPV) = PV(Benefits) - PV(Costs). If NPV > 0, the project creates value. Benefit-Cost Ratio (BCR) = PV(Benefits) / PV(Costs). BCR > 1 means benefits exceed costs. Payback Period = Years until cumulative benefits cover cumulative costs.
Discounting Future dollars are worth less than present dollars because of the time value of money. A discount rate of 3-7% is typical for public projects; private investments often use 8-12%. The higher the discount rate, the less weight is given to distant future benefits.
Limitations CBA struggles with benefits that are hard to quantify (health, environment, equity). Shadow pricing and willingness-to-pay studies help assign monetary values to non-market goods.