when determining costs consider if they re recurring or one time expenses additionally evaluate whether costs are variable or fixed for fixed costs consider step costs and relevant ranges that could impact those expenses 
 costs can be financial such as expenses recorded on an income statement or non financial such as negative repercussions on the community every project will have different underlying principles benefits might include the following analysts or project managers should assign a monetary value to all items on the cost benefit list and be careful not to underestimate costs or overestimate benefits a conservative approach that avoids subjective tendencies when calculating estimates is best for assigning value to costs and benefits in a cost benefit analysis analysts should also know the challenges in determining explicit and implicit benefits explicit benefits require future assumptions about market conditions sales volumes customer demand and product expectations implicit costs such as the impact of increased employee satisfaction may be difficult to quantify as there s no straightforward formula to calculate the financial effect of happier workers with the cost and benefit figures in hand it s time to perform the analysis this involves concisely summarizing the costs benefits net impact and how the findings support the original purpose of the analysis however some cost benefit analyses require more detailed examination this may include if a cost benefit analysis is positive the project offers more benefits than costs however a company must consider its limited resources which may force it to make mutually exclusive decisions for example a company with limited capital might find positive cost benefit analyses for upgrading its warehouse website and equipment but it may not have enough funds to pursue all three projects at the same time not all cost benefit analyses that result in net benefit should be accepted for example a company must consider the project s risk alignment with its company image and capital limitations advantages of cost benefit analysisthere are many reasons to perform a cost benefit analysis the technique relies on data driven decision making with recommendations based on quantifiable information specific to a single problem a cost benefit analysis requires substantial research across all costs including unpredictable ones and a thorough understanding of expense types and characteristics this extensive research strengthens the findings and supports strategic planning efforts a cost benefit analysis also requires quantifying non financial metrics such as the financial benefit of increased employee satisfaction although challenging to assess this process forces the analyst to consider aspects of the project that are harder to measure the ultimate goal is to deliver a straightforward report that simplifies decision making limitations of cost benefit analysisan in depth cost benefit analysis may suffice for making a well informed rational decision for projects that involve small to mid level capital expenditures and short to intermediate completion times however for large projects with a long term time horizon a cost benefit analysis might overlook critical factors such as inflation interest rates varying cash flows and the present value of money using net present value npv in project decisions offers the benefit of considering an alternative rate of return that could be earned if the project weren t undertaken a positive npv indicates that the projected earnings exceed the anticipated costs making the project a worthwhile investment while a negative npv suggests the opposite 4however any cost benefit analysis model includes numerous forecasts such as future revenue alternative rates of return expected costs and future cash flows if one or two forecasts are inaccurate the cost benefit analysis results could be questioned highlighting the limitations of this approach requires data driven analysislimits analysis to only the purpose determined in the initial step of the processresults in deeper potentially more reliable findingsdelivers insights to financial and non financial outcomesmay be unnecessary for smaller projectsrequires capital and resources to gather data and make analysisrelies heavily on forecasted figures if any single critical forecast is off estimated findings will likely be wrong