Structure cost-benefit analyses with quantified costs, benefits, NPV, BCR, and sensitivity testing for project decision making.
Place a project's monetary costs and benefits in the periods when they occur, then use the calculator to compare their present values. It reports discounted costs, discounted benefits, net present value (NPV), and the benefit-cost ratio (BCR), with sensitivity results for changed assumptions. NPV shows net value in base-period terms; BCR shows discounted benefits per dollar of discounted cost. A common misread is treating a BCR of 1.20 as a 120 percent return. It means $1.20 of benefits per $1.00 of cost.
A concrete input and expected output from the current implementation.
Input
Discount rate: 10%; period 0 cost: $100; period 1 benefit: $60; period 2 benefit: $60; all other amounts: $0
Expected output
Present value of costs: $100.00; present value of benefits: $104.13; NPV: $4.13; BCR: 1.04
The immediate cost remains $100. The benefits have a present value of $60 / 1.10 + $60 / 1.10^2 = $104.1322, so NPV is $4.1322 and BCR is 1.0413 before rounding.
Assign costs and benefits to periods and supply a discount rate matching the period length. The present value of a period-t amount is amount / (1 + rate)^t. The calculator sums discounted benefits and costs separately, subtracts costs from benefits for NPV, and divides benefit present value by cost present value for BCR.
Sensitivity testing recalculates the decision metrics after assumptions change. Vary cost estimates, expected benefits, timing, or the discount rate to see whether NPV changes sign or BCR crosses 1. Testing one assumption at a time isolates its effect; testing combined downside assumptions examines a more demanding case. These tests show responsiveness, not the probability of each scenario.
No. A positive NPV means the entered benefits exceed the entered costs after discounting. Approval can still depend on budget limits, execution risk, financing, competing projects, and effects that were not monetized. Treat the result as evidence from the stated assumptions, then review whether those assumptions and exclusions are acceptable.
Not always. BCR can favor a small project that creates little total value, while NPV measures the net amount created. The ratio is also sensitive to how costs and negative benefits are classified. For mutually exclusive projects, compare them using consistent timing and assumptions, and examine incremental costs and benefits rather than relying on BCR alone.
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