Cost-benefit analysis: basic principles

The capital investment decision making process is critical to the long term economic efficiency of capital intensive industries such as those involved in the supply of public infrastructure services. It is essential that decisions regarding capital investment be subjected to a formalised evaluation process which is applied consistently across all projects. This paper sets out the basic principles of cost-benefit analysis. Issues discussed include the generation of options to be considered; the quantification of costs and benefits; the choice of discount factor; and the treatment of risk and uncertainty. Although a practical approach to the use of cost-benefit analysis is followed here, the theoretical underpinnings of the method are discussed in Appendix A. Appendix B gives an overview of the main issues faced by practitioners when undertaking cost benefit analysis of transport projects.

  • Authors:
    • Ferreira, L
    • Starrs, M

Language

  • English

Media Info

  • Pagination: 21-43

Subject/Index Terms

Filing Info

  • Accession Number: 01433618
  • Record Type: Publication
  • Source Agency: ARRB
  • Files: ATRI
  • Created Date: Aug 24 2012 5:48PM