Interpret Results Of The Analysts And Final Action

When the evaluation of the project is complete, the results have t interpreted. This entails comparing actual results against a standard or result of an alternative investment. The interpretation phases as well as the subsequent decision phase are subjective, requiring judgment and intuition. Depending on the level of uncertainty, the analyst may be confronted with a single known value or a range of values. In either case, is measures such as net benefit analysis are easier to calculate and p than other measures, although they do not discount future cash flows can be modified to include the time value of money, the net benefit me would be comparable to the net present value method. More complex measures such as net present value account for the time value of money but are more difficult to evaluate and present.

The decision to adopt an alternative candidate system can be subjective, depending on the analyst or end user's confidence in estimated costs and benefits and the magnitude of the investment.

In summary, cost/ benefit analysis is a tool for evaluating projects rather than a replacement of the decision maker. In real-life business situations, whenever a choice among alternatives is considered, cost benefit analysis is an important tool. Like any tool, however, it has problems:

1. Valuation problems. Intangible costs and benefits are difficult to quantify, and tangible costs are generally more pronounced than tangible fits. In most cases, then, a project must have substantial intangible be to be accepted.

2. Distortion problems. There are two ways of distorting the results of benefit analysis. One is the intentional favoritism of an alternative for p cal reasons. The second is when data are incomplete or missing from analysis.

3. Completeness problems. Occasionally an alternative is overlooked compromises the quality of the final choice. Furthermore, the costs related to cost/benefit analysis may be on the high side or not enough costs may be considered to do a complete analysis. In either case, the reliability of final choke is in doubt