What are the steps in a cost-benefit analysis?

Can you explain the steps involved in a cost-benefit analysis?

Sure! A cost-benefit analysis typically involves the following steps: 1. Define the project or decision. 2. Identify costs and benefits. 3. Assign monetary values to costs and benefits. 4. Compare the total costs to the total benefits. 5. Make a decision based on the analysis.

What types of costs should I consider?

You should consider both direct costs, like materials and labor, and indirect costs, such as overhead and opportunity costs.

How do I assign monetary values to benefits?

You can assign monetary values to benefits by estimating the financial impact of each benefit, using market values, or applying methods like contingent valuation.

What if the costs outweigh the benefits?

If costs outweigh benefits, it may indicate that the project is not viable. You might consider revising the project or exploring alternatives.

Can you give an example of a cost-benefit analysis?

Certainly! For instance, if a city is considering building a new park, they would analyze costs like land acquisition and maintenance against benefits like increased property values and community health.