The steps required to carry out cost-benefit analysis include:

Identify the goal: Identify the goal that you wish to solve.
Identify the options: Identify the various options to obtain the goal.
Clarify the scope: Decide whose costs and benefits count (scope or ‘standing’).
Identify the impacts and indicators: Identify the impacts of each option and appro-
priate measurement indicators.
5. Decide on a time horizon: Decide on the time horizon over which to assess each
option.
6. Value the impacts: Estimate the discounted monetary value of the costs and bene-
fits of each option.
a. Start with financial values – based on market transactions.
b. Convert to economic values – based on opportunity cost.
7. Analyse distributional issues: Analyse the distribution of costs and benefits of
each option.
8. Compare the options: Compare the net present value of each option as well as the
risks and uncertainties involved with each option.
9. Perform sensitivity analysis: Test each option for changes in assumptions and
key
data.
10. Present results and make a recommendation: Make a recommendation based on
the preceding steps.