CONCEPTUAL-METHODOLOGICAL BASES OF COST-BENEFIT ANALYSIS IN THE EVALUATION AND RATING OF THE COST-EFFECTIVENESS OF PROJECTS
CONCEPTUAL-METHODOLOGICAL BASES OF COST-BENEFIT ANALYSIS IN THE EVALUATION AND RATING OF THE COST-EFFECTIVENESS OF PROJECTS

Summary/Abstract: Cost-benefit analysis is a very useful tool in modern project management and decision-making, used to assess the cost-effectiveness of a project. The choice of a project and the way (model) how the most cost-effective option will be financed depend on the results of said analysis. Cost-benefit analysis, whose basic parts are financial and economic analyses,has the broadest application in researching project acceptability. It is applied in the selection of public projects and for the purpose of evaluating the private projects partly financed from state funds, through loans or foreign investments (primarily through the sale of shares and bonds), and for the purpose of evaluating projects with negative externalities as well. In this article, financial analysis is first addressed as a comprehensive cash flow assessment which includes the analysis of the total investments, the analysis of operating costs and revenues, and the financial sustainability of a project, after which an answer to the question of the effects of the project’s market and nonmarket effects is obtained through an economic analysis, in which the conversion of accruals into current prices and the monetization of the project’s nonmarket effects are performed, based on which analysis the indirect effects of the project are included in the analysis. Finally, the social value of the project is determined within the framework of this analysis by discounting reduced costs and benefits.

• Details
• Contents