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Cost Benefit Analysis

A CBA allows for the analysis of the financial viability of a single project (scenario).

Creating a new Cost-Benefit Analysis (CBA) Setup

Description Illustration
Right click on a Group and select New Cost-benefit analysis from the context menu. ./CostBenefitAnalysis/image1.png
A CBA Setup
has now been created under the analysis group.		 ./CostBenefitAnalysis/image3.png
The CBA Setup can be copied, cut, renamed, deleted, and exported through the context menu. ./CostBenefitAnalysis/image4.png

Viewing and editing CBA Setup Properties

Description Illustration
Double click or right click on a CBA Setup and select Open from the context menu to view the CBA Setup properties. ./CostBenefitAnalysis/image5.png
This opens the CBA Setup spreadsheet view, which includes four worksheets: Costs and Benefits, Funding and Minimums, Input Time Series, and Conversions. Only the Costs and Benefits worksheet is accessible at this point.
Note: The name in the CBA Setup tab will only change once it is saved.		 ./CostBenefitAnalysis/image6.png
CBA Setup properties can be accessed by clicking into the CBA Setup Costs and Benefits worksheet.
This displays the associated properties in the Properties control.
The properties include information about:
  • First year (of evaluation - editable)
  • Last year (of evaluation - editable)
  • Monetary Units (editable)
  • Scenario (editable)
    		•  ./CostBenefitAnalysis/image7.png

    Working with CBA Costs Items

    Description Illustration
    In the CBA Setup Costs and Benefits worksheet click onto the Add Item button ().
    Note: CBA Items include Costs, benefits, Funding, and Minimums    		 ./CostBenefitAnalysis/image9.png
    This adds a new CBA Item to the worksheet.
    Note:
  • CBA Items initially have a name in the format “CBA Item1”, “CBA Item2”, etc.
  • Additional CBA Items can be added using the Add Item button ().
    		•  ./CostBenefitAnalysis/image10.png
    Click on a CBA Item’s name to view and edit the general (‘Misc’) properties in the Properties Control.
    The general properties include the following:
  • Group (editable – required)
  • Name (editable)
  • Significant number of digits (editable)
    		•  ./CostBenefitAnalysis/image11.png
    Set costs and benefits properties in the respective groups.
    These include the:
  • Annual Discount rate (%) (editable – can be zero)
  • First year (editable)
  • Last year (mostly editable)
  • Type (editable)
  • Unit (editable)
  • Value/ID (editable)
    Note:
  • The first and last years must be within the range defined for the CBA Setup.
  • Units are free format and do not have to be monetary units.
  • Entries for Value/ID depend on the Type properties.
    		•  ./CostBenefitAnalysis/image12.png
    Select costs and benefits types in the Type property.
    Note:
    The following types are available:
  • Lump Sum
  • Running value
  • Yearly values
  • Running value from indicator
  • Yearly values from time series
    Warnings will appear if:
  • A selected time series does not cover the evaluation period
    		•  ./CostBenefitAnalysis/image13.png
    Navigate to the CBA Setup Funding and Minimums worksheet to define properties for a cost item’s Funding and Minimums.
    Note:
    Entering this information is optional
    Available types are:
  • Running value, and
  • Yearly values
    Other properties are similar to the ones for Costs and Benefits.
    		•  ./CostBenefitAnalysis/image18.png

    Working with CBA Input Time Series

    Description Illustration
    Navigate to the CBA Setup Input Time Series worksheet to review total annual values generated using the Cost Item’s specified properties.
    Note:
  • Total annual values for all cost items are listed.
  • By default, cells for all item types but ‘Yearly Values’ are locked (highlighted grey).
    		•  ./CostBenefitAnalysis/image19.png
    Enter total annual values for cost item components of type ‘Yearly Values’
    Note:     The corresponding cells in the Time Series worksheet table are not locked (white background).    		 ./CostBenefitAnalysis/image20.png

    Defining CBA Conversions

    Description Illustration
    Navigate to the CBA Setup Conversions worksheet to define conversion factors to the CBA Setup units.
    Note:
  • Conversion factors are only required for cost item components that are specified in units other than the CBA Setup units.
  • By default, cells for all components that do not require conversions are locked (highlighted grey).
    		•  ./CostBenefitAnalysis/image21.png
    Enter conversion factors for all required cost item components.
    Note:
  • The corresponding cells in the Conversions worksheet table are not locked (white background).
  • Conversion factors can vary over time.
    		•  ./CostBenefitAnalysis/image22.png

    Creating a new Cost-Benefit Analysis (CBA) Session

    Description Illustration
    Right click on a CBA Setup node and select New Session from the context menu. ./CostBenefitAnalysis/image23.png
    A CBA Session:
    has now been created under the CBA Setup.
    Note:
  • One or more CBA Sessions can be created under any CBA Setup.
  • The CBA Setup is automatically saved when a new CBA Session is created
  • A CBA Setup cannot be edited if it contains one or more CBA Sessions
    		•  ./CostBenefitAnalysis/image25.png
    The CBA Session can be cloned, deleted, renamed, and exported through the context menu. ./CostBenefitAnalysis/image26.png

    Reviewing CBA Sessions

    Description Illustration
    Double click or right click on a CBA Session and select Open from the context menu to view CBA Session properties. ./CostBenefitAnalysis/image27.png
    This opens the CBA Session spreadsheet view, which includes four worksheets: Input Time Series, Conversions, Time Series (actual), Time Series (PV), Annual CBA, CBA Summary, and CBA Graphs. All of these are active.
    Note:
  • The name in the CBA Session tab will only change once it is saved.
  • Only cost items of type ‘Yearly values’ can be edited.
  • All annual values appear in their original units.
    		•  ./CostBenefitAnalysis/image28.png
    Navigate to the CBA Session’s Conversions worksheet to review conversion factors.
    Note:     All conversion factors can be edited.    		 ./CostBenefitAnalysis/image29.png
    Navigate to the CBA Session’s Time Series (actual) worksheet to review actual monetary values.
    Note:     All values are now converted to the monetary units defined for the CBA Setup.    		 ./CostBenefitAnalysis/image30.png

    Working in CBA Sessions

    Description Illustration
    Navigate to the CBA Session’s Time Series (PV) worksheet to review monetary values in present terms. ./CostBenefitAnalysis/image31.png
    Select costs, benefits, funding or benefits minimums component to edit the discount rate in the Properties control.
    Note:
  • The present values are updated automatically for the entire CBA Session.
    		•  ./CostBenefitAnalysis/image32.png
    Navigate to the CBA Session’s Annual CBA worksheet to review annual CBA metrics.
    Note:
    The following metrics are provided:
  • Benefit Cost Ratio
    \frac {\text{benefits\ amount\ }\left(\text{present\ value}\right)}{\text{costs\ amount\ }\left( \text{present\ value} \right)}
    years (cells) with a benefit cost ratio less than one are highlighted
  • Funding Ratio
    \frac{\text{costs\ amount\ }\left( \text{present\ value} \right)}{\text{available\ funding\ amount\ }\left( \text{present\ value} \right)}
    years (cells) with a funding ratio larger than one are highlighted
  • Benefits above Minimum (original units)
    {{benefits\ amount\ }{(original\ units)}}-{{minimum\ benefits\ amount\ }{(original\ units)}}
    years (cells) where benefits in original units are less than the minimum required are highlighted
  • Benefits above Minimum (present value)
    {{benefits\ amount\ }{(present\ value)}}-{{minimum\ benefits\ amount\ }{(present\ value)}}
    years (cells) where benefits in original units are less than the minimum required are highlighted.
    CBA metrics computed over all years are provided at the bottom.
    The number of years with highlighted CBA metrics (i.e., in violation) are provided.
    Metrics that cannot be computed are depicted by a dash (‘-‘) and highlighted orange.
    		•  ./CostBenefitAnalysis/image33.png
    Navigate to the CBA Session’s CBA Summary worksheet to review summary CBA metrics by cost item and group.
    Note:
    These include the metrics listed under the Annual CBA worksheet plus:
  • Net Benefit
    {{benefits\ amount\ }{(present\ value)}}-{{costs\ amount\ }{(present\ value)}}
    negative net benefits are highlighted
  • Modified Internal Rate of Return (MIRR)
    \sqrt[n]{\frac{\text{Future\ Value\ of\ Benefits}}{\text{Present\ Value\ of\ Costs}}}
    negative MIRRs are highlighted
  • Equivalent Annual Cost (EAC)
    \frac{\text{Present\ Values\ of\ Costs}}{Repayment\ Factors\ ("A"\ values)}
    EAC is only computed if a large initial investment is followed by smaller annual operating costs
  • Number of years where funding is not met
  • Aggregate funding gaps
  • Number of years where benefits are not above the required minimums
  • Aggregate benefits above the required minimums
  • Break even years (aggregate benefits are greater or equal aggregate costs)
    		•  ./CostBenefitAnalysis/image34.png
    Navigate to the CBA Session’s CBA Graphs worksheet and select from the graphics icon () to create a variety of plots.
    Note:
    The following graphs are available:
  • Costs versus Benefits (bar chart)
  • Breakup of benefits by group (pie chart)
  • Lines of aggregate costs and benefits by cost item
    Any number of graphs can be added or deleted.
    		•  ./CostBenefitAnalysis/image36.png

    Comparing CBA Sessions

    Description Illustration
    In the Analysis manager, select two or more CBA Sessions,
    then right-click on the Compare sessions tool in the Tools Explorer’s Analysis Session Tools
    and select Run from the context menu.
    Note:
  • The CBA Sessions included in the CBA Comparison can be
    from different CBA Setups.
    		•  ./CostBenefitAnalysis/image40.png
    A CBA Comparison:

    has now been created under each of the involved CBA Setups.    		 ./CostBenefitAnalysis/image42.png
    The CBA Comparison can be renamed, deleted, and exported through the context menu. ./CostBenefitAnalysis/image43.png

    Reviewing CBA Comparisons

    Description Illustration
    Double click or right click on a CBA Comparison and select Open from the context menu to view CBA and marginal CBA metrics.
    Note:
  • CBA metrics that indicate negative returns are highlighted pink.
  • CBA metrics that cannot be computed are highlighted orange.
  • Marginal CBA metrics are presented to the right. These values are computed relative to the first CBA Session listed in the CBA Comparison.
    		•  ./CostBenefitAnalysis/image44.png
    Navigate to the CBA Comparison’s Graphical worksheet to review comparison plots.
    The following graphs are available, plotted by group:
  • Costs Comparison (bar chart)
  • Benefits Comparison (bar chart)
  • Net Benefits Comparison (bar chart)
  • Benefit Cost Ratio Comparison (bar chart)
    Graphs can be deleted.
    		•  ./CostBenefitAnalysis/image45.png