List a project's upfront cost, its yearly costs and its yearly benefits, set a discount rate, and see whether it pays off. You get net present value, the benefit-cost ratio, discounted and simple ROI, IRR and both payback periods, with a year-by-year table and chart.
Last updated:
Project costs & benefits
$
One-time investment paid today.
% / yr
Your cost of capital or required return.
One amount per year, separated by new lines or by a comma and a space. Leave empty if there are none.
Savings or extra revenue each year. Missing years count as 0.
Cash flow timing
Enter your values to see the result.
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How to use the Cost-Benefit Analysis Calculator
Enter the upfront cost paid at the start (year 0).
List the ongoing costs for each year, one number per year, such as maintenance, licences or staff time.
List the benefits for each year: savings, extra revenue or monetized gains, in the same order.
Set the discount rate (your cost of capital or required return) and choose end-of-year or mid-year timing.
Read the NPV and benefit-cost ratio, then check the payback periods, the yearly table and the chart.
Cost-benefit analysis formulas
A cost-benefit analysis (CBA) compares everything a project costs with everything it returns, after converting future amounts into today's money with a discount rate r:
Present value of an amount in year t: PV = amount ÷ (1 + r)t
IRR: the discount rate at which NPV is exactly zero
Example: a $50,000 system costs $8,000 to $9,000 a year to run and brings $18,000 to $28,000 a year in savings over five years. At an 8% discount rate the costs (including the upfront $50,000) are worth about $83,400 today and the benefits about $96,800, so the NPV is roughly +$13,400 and the BCR about 1.16.
How to read the results
Measure
Favorable
Unfavorable
Best used for
NPV
Above 0
Below 0
How much value a single project adds
Benefit-cost ratio
Above 1.0
Below 1.0
Ranking projects of different sizes
Discounted ROI
Above 0%
Below 0%
Explaining the return as a percentage
IRR
Above your discount rate
Below your discount rate
Comparing with a hurdle rate
Payback
Shorter than your limit
Longer than the project life
Judging liquidity and risk
Tips for a credible cost-benefit analysis
Include every cost: setup, training, maintenance, licences, staff time and the cost of disruption while switching over.
Use the same time horizon for costs and benefits, normally the useful life of the asset or system.
Count only incremental amounts: what changes because of the project, not costs you would pay anyway.
Test the discount rate and the benefit estimates. If the NPV stays positive with benefits 20% lower, the case is robust.
Keep the ratio and the NPV together. A small project can have a high BCR but add little value overall.
Frequently asked questions
How do you calculate a benefit-cost ratio?
Divide the present value of all benefits by the present value of all costs: BCR = PV(benefits) ÷ PV(costs). Each yearly amount is discounted with 1 ÷ (1 + r)^t, where r is the discount rate and t is the year. A BCR above 1 means benefits outweigh costs.
What is the difference between NPV and the benefit-cost ratio?
NPV is the difference between discounted benefits and discounted costs, so it tells you how much value a project adds in money. The BCR is the ratio of the two, so it shows value per unit of cost. NPV above 0 and BCR above 1 always go together, but the BCR is handier for ranking projects of different sizes.
What discount rate should I use?
Businesses usually use their weighted average cost of capital or a required rate of return, often somewhere around 6% to 12%. Public-sector analyses use rates set by the relevant agency. Because the result can be sensitive to the rate, try a few values to see if your conclusion changes.
What is discounted payback?
Simple payback counts how many years of undiscounted net benefits it takes to recover the upfront cost. Discounted payback does the same with present values, so it is always equal to or longer than the simple payback. This calculator interpolates within the year in which the cumulative total turns positive.
What does the mid-year option do?
By default each year's cash is assumed to arrive at the end of the year. Mid-year discounting treats it as arriving halfway through the year (exponent t − 0.5), which better fits costs and savings spread evenly over the year and gives a slightly higher NPV.
How should I value benefits that are not cash?
Convert them to money where you reasonably can: hours saved times a loaded hourly cost, errors avoided times the average cost of an error, and so on. Keep the assumptions written down and leave out anything you cannot estimate honestly; you can mention those in your report as qualitative benefits.
Is my data saved or sent anywhere?
No. All calculations run in your browser and nothing you type is uploaded. Your last inputs are remembered only in this browser so you can come back to them.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.