Cost-Benefit Analysis
A process by which business decisions are analyzed. The benefits of a given situation or business-related action are summed and then the costs associated with taking that action are subtracted. Some consultants or analysts also build the model to put a dollar value on intangible items, such as the benefits and costs associated with living in a certain town. Most analysts will also factor opportunity cost into such equations. Investopedia Says:
Prior to erecting a new plant or taking on a new project, prudent managers will conduct a cost-benefit analysis as a means of evaluating all of the potential costs and revenues that may be generated if the project is completed. The outcome of the analysis will determine whether the project is financially feasible, or if another project should be pursued. Related Terms:
Capital Budgeting
Cost Of Acquisition
Discounted Cash Flow - DCF
Equity-Efficiency Tradeoff
Guns And Butter Curve
Internal Rate Of Return - IRR
Net Present Value - NPV
Opportunity Cost
Scarcity
Shadowing |