Cost-Benefit Analysis Calculator
NPV of net benefits, Benefit-Cost Ratio, ROI, and payback period from a schedule of costs and benefits.
How cost-benefit analysis is calculated
Every cost and benefit you enter is discounted back to present value using your chosen discount rate, so amounts occurring in different periods can be fairly compared — a dollar of benefit five years from now is worth less than a dollar of benefit next year. The present-value benefits and costs are then combined into the Benefit-Cost Ratio (BCR = PV benefits / PV costs) and ROI, while the payback period is calculated separately from the raw, undiscounted cash flows.
This tool generalises the standard NPV calculator to handle separate cost and benefit schedules rather than a single net cash flow series, and adds the BCR and ROI framings on top of the underlying present-value math. For an ongoing view of spend against a fixed budget rather than a one-off investment decision, see the Startup Runway calculator.
Frequently asked questions
- What is the Benefit-Cost Ratio (BCR)?
- The present value of benefits divided by the present value of costs. A BCR above 1.0 means the discounted benefits outweigh the discounted costs at your chosen discount rate.
- Why is the payback period undiscounted while BCR and ROI are discounted?
- This follows the conventional split: payback period is a simple, discount-rate-agnostic measure of how long cash recovery takes, while BCR and ROI are meant to reflect the time value of money and use the present-value figures.
- Can costs and benefits use the same period number?
- Yes — periods don't need to be unique or exclusive to one array; a cost and a benefit can both land in period 2, for example, and they'll be netted together for the payback calculation.
- What is cost-benefit analysis (CBA)?
- Cost-benefit analysis is a systematic approach to evaluating a decision by comparing the total expected costs against the total expected benefits, typically expressed in present-value terms so cash flows occurring at different times can be compared fairly.
- What discount rate should I use for NPV?
- Use a rate that reflects the opportunity cost of the capital involved — a company's WACC is a common choice for corporate projects, or a personal required rate of return for individual decisions. Higher discount rates penalise benefits that arrive further in the future more heavily.
- What is the difference between BCR and ROI?
- BCR (Benefit-Cost Ratio) divides present-value benefits by present-value costs, giving a ratio where anything above 1.0 is favourable. ROI (Return on Investment) instead expresses net benefit as a percentage of the cost — the two are related but framed differently, and ROI doesn't always discount for the time value of money the way BCR does here.
- What payback period is typically acceptable?
- It depends heavily on the industry, the size of the investment, and organizational risk appetite — many organizations use informal benchmarks like 2–3 years for a "fast" payback, though large infrastructure or R&D investments routinely accept much longer periods in exchange for larger long-term returns.