What is "cost benefit analysis" in Project Management?

Cost-benefit analysis (CBA) is an analytical tool for assessing and the pros and cons of moving forward with a business proposal. 

A formal CBA tallies all of the planned project costs, quantifies each of the tangible benefits and calculates key financial performance metrics such as return on investment (ROI), net present value (NPV), internal rate of return (IRR) and payback period. The costs associated with taking action are then subtracted from the benefits that would be gained. As a general rule, the costs should be less than 50 percent of the benefits and the payback period shouldn't exceed 12 months.

Cost-benefit analysis is sometimes called benefit-cost analysis (BCA).

CBA is a quick and simple technique that you can use for non-critical financial decisions. Where decisions are mission-critical, or large sums of money are involved, other approaches – such as use of Net Present Values Add to My Personal Learning Plan and Internal Rates of Return Add to My Personal Learning Plan – are often more appropriate.

Cost benefit analysis is used in project appraisal to determine the costs and tangible benefits of the project and usually supplemented by break even units calculations, payback period,  ROI, IRR, NPV calculations as well

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In project management context CBA is a ratio that compares the expected cost of the project to the potential benefits it could bring.

If the ratio is more than one, benefits are greater than the cost investment.

It is a tool used when evaluating the costs vs. benefits in an important business proposal.

A formal CBA lists all of the project expenses and tangible benefits then calculates the return on investment (ROI), internal rate of return (IRR), net present value (NPV), and payback period. Then, the difference between the costs and the benefits from taking action are calculated.

A general rule of thumb is the costs should be less than 50% of the benefits and the payback period shouldn’t exceed past a year. Some people also refer to cost benefit analysis as benefit cost analysis (BCA).

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The cost which is spent for a purpose has its benefits more than that cost. And benefit is may be in monetary and non monetary value. E.g. If a company is going to spend 20,000 consultancy fee for hedging any type of risk amounting to 15000. This shows it is not beneficial to spent that cost.