Question

What is the rule for a project to be considered desirable given BCR or the NBV?

Answer 1

The Benefit cost ratio is calculated using the following formula

When BCR > 1, then the benefit is greater than Cost.

When BCR=1, then benefit is Equal to cost

When, BCR < 1, then benefit is less than Cost.

Therefore, a project must be considered when the Benefit Cost Ratio is greater than 1.

The Net benefit Value(NBV) is defined as

NBV = Benefit - Disbenefits - Cost

Thus, a project will be considered when the NBV is greater than zero.

BCR > 1 or, NBV > 0.

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