Cost-benefit analysis (CBA) is a critical tool in Project Cost Estimation and decision-making. It involves evaluating the costs and benefits of a project to determine its overall feasibility and economic viability. Here’s how CBA contributes to effective cost management:

• Project Justification: CBA helps project managers and stakeholders assess whether the benefits of a project outweigh its costs. It serves as a basis for project justification and approval.
• Cost Estimation: CBA requires a detailed breakdown of project costs, including initial investment, operating costs, and maintenance expenses. This comprehensive cost estimation ensures that all financial aspects are considered.
• Benefit Identification: CBA identifies and quantifies the expected benefits of a project, which may include increased revenue, cost savings, improved efficiency, or enhanced customer satisfaction.
• ROI Calculation: CBA calculates the Return on Investment (ROI) by comparing the net benefits (benefits minus costs) to the initial investment. A positive ROI indicates that the project is financially viable.
• Risk Assessment: CBA allows for sensitivity analysis to assess how variations in costs and benefits affect project outcomes. It helps identify potential risks and uncertainties in cost and benefit projections.
• Decision-Making: CBA provides a structured framework for decision-making. Projects with positive net benefits are typically prioritized, while those with negative or marginal outcomes may be reconsidered or modified.