cost benefit analysis (CBA)

  

Definition

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. See also feasibility study.

Use this term in a sentence

  • Using a cost benefit analysis strategy should allow you to make better educated guesses on what investments are the right ones.

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  • The businessmen discussed the future of their company and their cost benefit analysis for the year at the annual meeting.

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  • A good cost benefit analysis strategy will allow you to find the right plan to get the biggest profits that you can.

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