What typically follows the assessment in a cost/benefit analysis?

In a cost/benefit analysis, the phase that typically follows the assessment involves discounting expected future costs. This step is crucial because it allows analysts to evaluate the present value of future costs, which helps in accurately determining whether an investment or project is financially justifiable over time. Discounting enables the organization to compare the initial costs and ongoing benefits to their present values, leading to a more informed decision regarding the feasibility and profitability of the proposed project.

Discounting expected future costs takes into account the time value of money, which reflects the principle that a dollar today is worth more than a dollar in the future due to the potential earning capacity of that dollar. By applying a discount rate, organizations can express future costs in today’s terms, facilitating a clearer comparison between costs and benefits. This process is vital in strategic planning and investment decisions, ensuring that organizations allocate resources effectively for long-term success.