ABSTRACT
Benefit-cost ratio (BCR) is simply the ratio of benefits to costs. A benefit-cost ratio greater than one implies that the benefits outweigh the costs which makes the project investment worthy. Engineering economics projects can be categorized into one of two groups: no-alternative or multi-alternative. In no-alternative projects, there is only one candidate, and hence no choice. BCR is commonly used in economic analysis of government projects which aim at benefitting as many people as possible. BCR-analysis can at times be confusing, especially if it is difficult to decide whether the cash outflow(s) other than the first cost should be treated as cost or disbenefit. Under the concept of disbenefit, all costs other than the first cost are paid out of project benefits. For fixed-output or fixed-input multi-alternative projects, alternatives’ individual BCRs are ranked, and the alternative of the highest BCR is selected.
