Benefit-Cost Analysis

Benefit-cost analysis is an economic tool that has generally been applied to project analysis. With its basis in Social Welfare theory, it seeks to assess the aggregate impact of investment decisions. In general, benefit-cost analysis has the ability to determine whether a given investment decision will make society better off. That is, the returns from investment are greater than the costs. Economic BCA is similar to, but distinctly different from, financial analysis. Whereas financial analysis deals strictly with real cash flows, BCA considers both monetary and non-monetary costs and benefits, although in practice the scope of analysis can be quite limited.