Probabilistic benefit cost ratio: a case study

In this paper, a Monte Carlo approach to arriving at a probabilistic distribution of Benefit Cost Ratio (BCR) is presented and discussed. BCR is the ratio of the benefits of a project relative to costs and is generally seen as an indicator of the overall value for money of a project. A BCR calculation generally forms an integral part of a project proposal and used by governments to assist them in making investment decisions on projects. Project costs are increasingly being prepared by using a Monte Carlo approach whereby cost items and attendant risks are represented as probability distributions and then multiple simulations are computed to generate a probability distribution of the total cost of the project. However, the BCR is usually presented as a single number instead of a distribution, often because project benefits are still calculated as a single number. In this paper, probabilistic estimation (Monte Carlo) method is presented and then probabilistic distributions of total costs and total benefits are used to generate a probabilistic distribution of the BCR using the Monte Carlo approach. Finally the application and implications of the BCR probabilistic distribution are discussed via a case study.


  • English

Media Info

  • Pagination: 14p
  • Monograph Title: Informing transport's future through practical research: 37th Australasian Transport Research Forum, 30 September to 2 October 2015, Sydney, New South Wales

Subject/Index Terms

Filing Info

  • Accession Number: 01586983
  • Record Type: Publication
  • Source Agency: ARRB
  • Files: ITRD, ATRI
  • Created Date: Jan 14 2016 11:46AM