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content/notes/25-cost-benefit-analysis.md
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@ -85,8 +85,25 @@ e.g.,
- payback period - how long until accumulated benefits equal the cost
- NPV: sum of costs and benefits , but future years discouted
- ![example](https://i.imgur.com/W6lhzKb.png)
- ![](https://i.imgur.com/rpOBYdc.png)
- ROI: what is the discounted benefit relative to the costs
- ![](https://i.imgur.com/puvRpYm.png)
- ![](https://i.imgur.com/19rMyQa.png)
# Example: what is better
- ![](https://i.imgur.com/nxMstV5.png)
- financial analysis isn't everything
- possible reasons to ignore a financial analysis
- organisational: ack of institutional will, or not aligned with strategy, or legislated requirement
- technical
- legal risk
- reputational risk
# Comparing methods
- payback: ignores discounting; gives a *year*
- NPV considers discounting, give *net benefit* in financial terms, but ignores time and amount invested
- ROI considers discounting and amount invested, but ignored time period; gives a *percentage*
-
![summary](https://i.imgur.com/rnBdIfg.png)