Cost-Benefit Analysis Calculator

Evaluate the financial viability of industrial engineering projects and investments

Cost-Benefit Analysis

This calculator helps you evaluate the financial viability of projects by comparing costs and benefits over time. Make data-driven decisions for your industrial engineering investments.

NPV = Σ [Benefitₜ - Costₜ] / (1 + r)ᵗ

Where:

  • NPV = Net Present Value
  • Benefitₜ = Benefits in time period t
  • Costₜ = Costs in time period t
  • r = Discount rate
  • t = Time period
ROI = (Net Benefits / Total Costs) × 100%

Where ROI is the Return on Investment percentage.

Project Information

Costs

Enter all project costs by year:

Benefits

Enter all project benefits by year:

Results for:

Net Present Value (NPV)

Return on Investment (ROI)

Payback Period

Benefit-Cost Ratio (BCR)

Interpretation

Recommendation

Financial Summary

Year Costs ($) Benefits ($) Net Cash Flow ($) Discounted Cash Flow ($) Cumulative Cash Flow ($)

Cash Flow Visualization

Practical Examples

Example 1: Equipment Upgrade

Initial Cost: $100,000 | Annual Savings: $30,000 | Time Horizon: 5 years | Discount Rate: 5%

NPV = $29,883 | ROI = 50% | Payback Period: 3.3 years

This investment would be financially viable with a positive NPV.

Example 2: Automation Project

Initial Cost: $500,000 | Annual Savings: $150,000 | Time Horizon: 7 years | Discount Rate: 6%

NPV = $337,000 | ROI = 110% | Payback Period: 3.3 years

This project would be highly beneficial with strong returns.

Example 3: Process Improvement

Initial Cost: $50,000 | Annual Savings: $8,000 | Time Horizon: 5 years | Discount Rate: 5%

NPV = -$15,445 | ROI = -15% | Payback Period: 6.3 years

This project would not be financially viable based on these estimates.

Understanding Cost-Benefit Analysis

Cost-Benefit Analysis (CBA) is a systematic approach to estimating the strengths and weaknesses of alternatives used to determine options that provide the best approach to achieving benefits while preserving savings.

Key metrics in CBA:

  • Net Present Value (NPV): The difference between the present value of cash inflows and outflows
  • Return on Investment (ROI): A performance measure used to evaluate the efficiency of an investment
  • Payback Period: The length of time required to recover the cost of an investment
  • Benefit-Cost Ratio (BCR): The ratio of the benefits of a project relative to its costs
Decision Rule: Accept project if NPV > 0, ROI > required return, and BCR > 1