Cost-benefit analysis (CBA)

Cost-benefit analysis is the systematic and analytical process of comparing benefits and costs in evaluating the desirability of a project or programme. CBA has two primary purposes: i) To decide whether the project is sound, justifiable, and viable by deciding whether its benefit prevails over cost, and t; ii) To provide a benchmark for project evaluation by assessing the advantages of which project are greater than its costs. CBA involves translating all benefits and costs into monetary terms, including nonmarketed environmental, social and other impacts. Subsidies or taxes are viewed as societal transfers that are net-out and excluded from the analysis. Benefits and costs over time are discounted to current value using social discount rate that is typically lower than the market interest rate relevant to private investors.