Chapter 10.1, Problem 2R

To determine

To state: The steps involved in the cost benefit analysis

Answer to Problem 2R

There are five steps in the cost benefit analysis.

Explanation of Solution

The list of steps in the cost benefit analysis are as follows:

1. To evaluate the cost of the project or the initial investment
2. Calculate the revenues that are expected to realize.
3. Calculate profits
4. Calculate interest on loan taken for the project
5. Check profits v/s costs. If the cost is more than the profits, one should not accept the option. If profits are more than the costs, option should be accepted.

Economics Concept Introduction

Introduction: Cost benefit analysis helps to choose a better option for a business by analyzing the benefit caused from a particular cost.