The Benefits of Cost-Benefit Analysis to Improving Business Decisions

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The benefits of cost-benefit analysis to improving business decisions
Cost-Benefits Analysis (CBA) is the process of using theory, data, and models to study products, exchanges, and activities for measuring relevant ideas and alternative solutions in order to support decision-makers in choosing the most appropriate alternative. This paper explores how CBA may best be used, focusing on the effectiveness of CBA during the early phase of a program life-cycle in ensuring that there are worthwhile alternatives in making investment decisions. It also examines the measures and the methodology used to develop a CBA, addresses the accuracy and reliability of CBA, and identifies techniques available to support decision-making in the early phase of a program’s life-cycle. It also notes, however, that because not all costs and benefits can be quantified, measures other than CBA should also be considered in making business decisions.

The effectiveness of CBA lies in its ability to provide increased understanding of the consequences of proposed public programs. CBA must be understood as one means to support decision-makers in making the best decisions for the public good. The value of CBA will vary with the importance of mandates, policies, and regulations. For example, CBA offers a well-established and tested approach, supported by substantial research, for identifying and assessing corporation. A CBA can enable decision-makers to make prioritized decisions about business programs. It provides a broad view of the programs’ costs and benefits, as well as other economic factors that are critical to the budget process. Most importantly, a CBA is measurable. CBA provides information on monetary strength as well as on individuals’ willingness to make the types of trade-offs inherent in many social investment decisions. According to Makowsky and Wagner, this type of exchange often…...

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