Preparing a cba or cost benefit analysis is a valuable tool

Question

All of us have performed a simple cost benefit analysis (CBA). We just might not have realized it! Every time we "shop around" or comparison shop, we are performing a simple cost benefit analysis.

Preparing a CBA or Cost Benefit Analysis is a valuable tool to use not only in your professional career but also in your personal life as well. CBA's help us make decisions to determine which path to take. CBA's can be very simple (deciding which piece of equipment or software to purchase) or very complex (deciding whether or not to open a branch in another country.)

CBA's allow us to compare the benefits or advantages of two or more items or scenarios or to analyze the benefits and advantages of "decision A versus decision B." A CBA usually centers on costs. Consider what this item or project is going to cost you and consider how you might benefit financially in the long run.

When considering benefits or assets, we need to look at both tangible and intangible benefits. Tangible benefits are those that you can see and count; we can measure tangible benefits. We also look at what we call intangible benefits or benefits that are hard to measure or count. For example: You can put a price tag on a new car, but pride of ownership or that "happy" feeling you might get when driving a particular car is intangible and is hard to price.

For this case study assignment, prepare a simple CBA, just to get some experience and to somewhat know what people mean when they talk about CBA's. Select an item that is relevant to you! For example, you might be in the market for a new car, a new high definition television, or a new laptop computer. Perhaps you need to move to a different apartment, or perhaps you want to determine whether to move to Atlanta, GA, or to Charlotte, NC. You should prepare a CBA to help you make these types of decisions.

You have a choice in the way you format your cost benefit analysis. You may either create a PowerPoint presentation or prepare a report using Microsoft Word.

Complete the following steps:

1. Document the goal you want to achieve. What sort of decision do you need to make? What is your purpose? (Every purchase or decision has a goal attached to it.)
2. Select two similar items of different make and manufacturer or select two different paths that you might take.
3. Conduct your research.
4. Make sure you cover all your bases. Consider every little detail. Thorough research ensures a sound decision. For example, if you are purchasing a car, consider resale value, depreciation rates, insurance costs, and costs for oil changes and maintenance.
5. Arrange your data in a chart or table that shows and compares all of the costs of the two items for one year out. Charts and tables are useful for comparing data side by side. For example, compare the gas mileage of both that Toyota and Chevy side by side so you can see the differences clearly. On the job, you'll have to go much further than one year out, but we'll keep it simple here.) These costs will include the original purchase price, any monthly service fee, the time involved to set up the equipment (In the business world, time is money.) and any start up costs. For example, if you buy a car, you must include the cost of a tank of gas and the cost of tax, title and tag.
6. Include any intangible benefits for the items.
7. Analyze the costs and benefits.
8. Make your decision based on your cost benefit analysis.
9. Cite any sources you use for information at the end of your file. Use APA format.
10. Name your file U4_Case_(Your last name) and submit for grading.