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):
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.
© 1996 A.J.Filipovitch
Revised 11 March 2005