Question

Describe the usual steps taken in a typical cost- benefit exercise?

Answer 1

Answer:

Steps of Cost-Benefit Analysis

#1 – Define the framework for the analysis. ...

#2 – Identity and classify costs and benefits. ...

#3 – Drawing a timeline for expected costs and revenue. ...

#4 – Monetize costs and benefits. ...

#5 – Discount costs and benefits to obtain present values. ...

#6 – Compute net present values.......................

Answer 2

Answer:

10 Basic Steps For Cost-benefit Analysis

1. Set the framework for the analysis. Specify the program or policy change and the current status quo, or the state of the world before implementation compared to after.
2. Decide whose costs benefits should be recognized. You need to determine the geographic scope of the analysis in order to limit the groups impacted by the policy.
3. Identity and categorize costs and benefits. It is important to label costs and benefits as direct or indirect, tangible or intangible, and real in order to ensure that you understand the effects of each cost and benefit.
4. Project costs and benefits over the life of the program. Assess how costs and benefits will change each year. It is important to do this even before you begin to place numbers on things.
5. Monetize costs. Make sure to place all costs in the same unit.
6. Monetize benefits. Make sure to place all benefits in the same unit.
7. Discount costs and benefits to obtain present values. This means converting future costs and benefits into present value.
8. Compute net present values. This is done by subtracting costs from benefits. The policy is considered efficient if a positive result is produced; however, it is important to think about the policy’s feasibility and social justice.
9. Perform sensitivity analysis. This step allows you to check the accuracy of your estimates and assumptions. This is normally done by altering the social discount rate utilized, by increasing it and decreasing it.
10. Make a recommendation. Assess all results and account for other qualitative considerations.