Cost-Benefit Analysis
Identify costs and benefits, build year-by-year cash flow, discount future values, calculate Net Present Value, Benefit-Cost Ratio, payback and ROI, then test whether the economic case remains robust under downside assumptions.
Compare the Present Value of What the Initiative Costs With the Value It Creates.
Cost-Benefit Analysis converts an initiative’s expected costs and benefits into a consistent economic view. It helps decision-makers understand whether the value expected from an investment is sufficient to justify its cost.
- Identify all material one-time and recurring costs.
- Define benefit streams and their realization assumptions.
- Build year-by-year cash flow.
- Discount future costs and benefits to present value.
- Use sensitivity analysis to test whether the conclusion is robust.
Cost-Benefit Analysis — Step by Step
Eight locked stages move from analysis context through cost, benefit, cash-flow and present-value analysis to sensitivity testing and management interpretation.
Define the Cost-Benefit Analysis Context
Customer Onboarding Automation
Define the analysis context before adding costs and benefits.
Cost-Benefit Cash-Flow Register
The complete cash-flow register shows nominal and present-value amounts for each year in a readable card-based format.
Test Your Own Sensitivity Assumptions
Experiment Mode is isolated from the guided CBA. Change benefit realization, cost escalation and discount rate to see how NPV, BCR and payback respond.
Quick Knowledge Check
Core CBA Measures
Present Value
Future cash flow divided by (1 + discount rate) raised to the period number.
NPV
Present value of benefits minus present value of costs. Positive NPV indicates net economic value.
BCR
Present value of benefits divided by present value of costs. A ratio above 1.0 means discounted benefits exceed discounted costs.
Payback
Time required for cumulative net cash inflows to recover the initial investment.