Cost/Benefit Analysis (E)
What is the project? How to select and justify the project? How to plan and execute the project?
Posted: Sep 2010
Cost / Benefit analysis is statement that compares of the costs of a proposed project in relation to the benefits that the project will generate.
Calculation is very simple: the costs are subtracted from the benefits. If the result—the net cash inflow—is negative (if costs are more than the benefits), the project is probably not going to be implemented, unless the project is imposed by regulations. If the result is positive, then the proposed project will probably deserve detailed approach.
A cost-benefit analysis typically includes both the financial and the non-financial analysis of the project.
The financial analysis would start with identifying the initial investment, ongoing operating costs, and required additional investments, and the financial returns, such as increased revenue, displaced costs, and avoided costs.
The process can become complex if intangible benefits (environmental impact, customer response) are to be factored in to the analysis. In this case those intangibles must have a quantitative value assigned to them.
Continue on Project Management:
1. Project Management Overview
2. 9 Areas of Project Management
3. Project Lifecycle – 5 Stages of Project
4. How to Determinine a Value of the Project?
4.1. Simple Payback
4.2. Average Return on Investment (ROI)
4.3. Net Present Value (NPV)
4.4. Internal Rate of Return (IRR)
4.5. Cost/benefit analysis
4.6. Time value of money
4.7. Present value of future payments
4.8. Justification of Addopted project
5. Project Planning – Project Charter
6. Work Cascading Structure (WBS)
7. Project Scheduling ( Arrow-on-Arrow and Gantt Chart )
8. Project Scheduling ( CPM and PERT )
9. The Responisbility Matrix
10. Resources and Budget Planning
11. Clasification of Projects