Sources of Data & Calculation Process for Benefit/Cost


A benefit/cost analysis may be as simple as a ratio quickly scribbled on the back of an envelope; it may be as complicated as a mathematical model built on a mainframe computer which no single person understands in its entirety. The model presented here is a fairly simple one, but it includes most of the elements to permit the analyst to expand it into as confusing and complex a model as one could want. The one element which has been excluded is discounting; more about that later.

The data for a benefit/cost analysis are entirely user-generated and are usually unique to each project. The analyst will need to construct the following tables (the dots [...] indicate user-supplied data):

 
 
 EVALUATION MEASURES
 
 Msr.1 Msr.2 Msr.3 Msr.4
 
 Project 1 ..... ..... ..... ..... 
 
PROGRAM Project 2 ..... ..... ..... .....
 
ALTERNATE Project 3 ..... ..... ..... .....
 
 Project 4 ..... ..... ..... .....
 
Discount Rate  . . . 
Number of Years  . . .
 
 TABLE OF IMPACTS
 
 WGTS FOR EVAL MSRS COSTS FOR PROGRAMS
 
 MSR WGT PROGRAM COST
 
 Msr. 1 ..... Project 1 .....
 
 Msr. 2 ..... Project 2 .....
 
 Msr. 3 ..... Project 3 .....
 
 Msr. 4 ..... Project 4 .....
 
 
 
TOTAL BUDGET = .....
 
 
 

The terms used in these tables are:

 
 
 SUMMARY OF COSTS AND BENEFITS
 
 
 
 WEIGHTED NO. OF WEIGHTED EFFECT/
 
 PROGRAM UNIT UNITS IN PROGRAM COST
 
 ALTERNATE EFFECT BUDGET EFFECT RATIO
 
 1 0 xxxx xxxx xxxx
 
 2 0 xxxx xxxx xxxx
 
 3 0 xxxx xxxx xxxx
 
 4 0 xxxx xxxx xxxx

This template includes a simple procedure for discounting the costs and impacts of a program. It assumes that all costs are incurred at some definite point, and all benefits are incurred at some definite point. A more complicated spreadsheet could be designed to consider a string of costs or benefits spread over time, each point in the string discounted to its present value and those values added together to arrive at the final ratio.


 

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1996 A.J.Filipovitch
Revised 11 March 2005