Abstract
This paper is a brief tutorial overview of a technique of benefit-cost analysis. The procedures for making the analysis are summarized. These include establishing the discount rate, calculating the benefit-cost ratio as a measure of effectiveness and comparing that measure with the criterion for feasibility. Two areas of concern have troubled some analysts. These are the numerator-denominator controversy and the ranking of competing alternative projects. It is shown how both are resolved so that the benefit-cost ratio method always yields the same results as other economic measures. A short bibliography provides an entry to the most useful recent literature.
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