Cost benefit analysis (CBA), is a systematic method to estimating the strengths and weaknesses of alternatives used to determine options which provide the best approach to achieving benefits while preserving savings. It can be explained as a methodology for estimating all costs involved and possible profits to be derived from a business opportunity.
CBA takes into account both quantitative and qualitative factors for analysis of the value for money for a particular project or investment opportunity. Benefits to costs ratio and other indicators are used to conduct such analyses. The objective is to ascertain the soundness of any investment opportunity and provide a basis for making comparisons with other such proposals. All positives and negatives of the project are first quantified in monetary terms and then adjusted for their time-value to obtain correct estimates for the analysis.
Hack Author: Rob Kalwarowsky P.Eng, CMRP, CRE, CLS
Rob is a Leader, Reliability Engineer, and Host of The Leadership Launchpad Project & Dismantling The High Performance Narrative podcasts. He produces content and coaches leaders to spread the importance of reliability, courageous leadership & mental health in the industrial community. Rob has spent almost 10 years as a reliability engineer & asset manager in mining, oil and gas, and consulting industries. He specializes in people-centric leadership, condition monitoring, failure prediction, spare parts optimization, and life cycle asset management. Prior to that, Rob graduated from the Massachusetts Institute of Technology (MIT) with a Bachelor of Science degree in Mechanical Engineering with a minor in Management.