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Process of quantifying costs and benefits of a decision, program, or project (over a certain period), and those of its alternatives (within the same period), in order to have a single scale of comparison for unbiased evaluation. Unlike the present value (PV) method of investment appraisal, CBA estimates the net present value (NPV) of the decision by discounting the investment and returns. Though employed mainly in financial analysis, a CBA is not limited to monetary considerations only. It often includes those environmental and social costs and benefits that can be reasonably quantified.
Cost-benefit analysis (CBA) is an analytical tool for assessing and the pros and cons of moving forward with a business proposal.
Definition of Cost benefit analysis (CBA)
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It is a technique for assessing the monetary social costs and benefits of a capital investment project over a given time period.
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Cost-Benefit Analysis (CBA) is a technique that compares the monetary value of benefits with the monetary value of costs in order to evaluate and prioritize issues.
CBA is a process conducted before initiating a business project or business action. The benefits of a given situation or business-related action are summed and then the costs associated with taking that action are subtracted. This is done to see if the benefits outweigh the costs and if so, by how much.
Benefit / Cost
Gainer=Benefit > Cost
Loser= Benefit < Cost
Cost-Benefit Analysis (CBA) estimates and totals up the equivalent money value of the total benefits and total costs associated with any project to establish whether it is feasible.
Prior to taking on any new project, prudent managers will conduct a cost-benefit analysis as a means of evaluating all of the potential costs and revenues that may be generated if the project is completed. The outcome of the analysis will determine whether the project is financially feasible, or if another project should be pursued.
CBA can also be used to choose the best project by comparing Net Present Value of Net Benefits (over Total Costs) of various projects.
Simply put, when any project is to be executed, a cost benefit anaylsis (CBA) should be carried out. This analysis allows forecasters to scrutinize the costs of a project vs the benefits they hope to achieve. For example, if we were to build an expressway, included in costs may be loss of vegetation and wild life. And a benefit, shorter travel times from point A to point B. After a CBA is done, unless the benefits we hope to derive exceed the costs, the project is not undertaken.
It is the process of quantifying costs & benefits of a decision, program or project (Over a certain period) & those of it's alternative's (Within that same period) to arise to an unbiased conclusion over the best possible alternative.
CBA is used in Merger & Acquisitions predominantly or carrying out an feasibility study over an situation.
:-)
Agree with Mr. Alex
CBA is a systematic process for calculating and comparing benefits and cost of a certain project and the purpose is to determine if it a sound investment or decision.
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