8.2.2 Why should be done these type of analysis ?

Prior to erecting a new plant or taking on a new project, prudent managers will conduct a cost-benefit analysis as a means of evaluating all the potential risks, costs and revenues that may be generated if the project is completed. The outcome of the analysis will determine whether the project is financially feasible, or if another project should be pursued.

Comparison of the cost of a solution and the economic benefits that would accrue if the solution is put into effect. In any case the benefits must exceed the risks and costs to justify the efforts or adopt the decisions. Analysis of risks, cost and benefit is used for determining which alternative is likely to provide the greatest return for a proposed investment.