Evaluate whether a project or investment is worthwhile. Calculate benefit-cost ratio, net benefit, ROI, and determine viability using discount rates.
A ratio above 1.0 means benefits exceed costs, making the project viable. Ratios above 2.0 are considered excellent. Government projects typically require at least 1.5, while private sector aims for 2.0 or higher.
The discount rate accounts for the time value of money. A dollar received in the future is worth less than a dollar today due to inflation, opportunity cost, and risk. Common discount rates range from 3-10%.
Include all direct and indirect costs such as equipment, labor, training, and maintenance. Benefits include revenue increases, cost savings, productivity gains, and risk reduction. Quantify intangible benefits where possible.