The following graphs show how projects can be compared using various summary measures of benefit-cost analysis. Each alternative project is represented by a dot on the graph; its benefits are measured vertically and costs horizontally. The red dots represent the best performing projects.
The following graph illustrates a benefit/cost ratio. The project with the steepest slope has the highest ratio of benefits to costs.
The following graph illustrates net present value. A 45° line is drawn through each point. The project with the highest vertical intercept has the highest net present value.
The following graph shows how the project with the highest net present value need not have the highest benefit-cost ratio. Any project located within the triangle below will have both a higher benefit-cost ratio and a lower net present value than the project represented by the red dot.
The following graphs illustrate cost-effectiveness. The first compares the costs for a given benefit; the second compares the benefits that can be achieved at a given cost.
Types of Measures >