Prakash, Surya and Mitchell, David (2015) Probabilistic benefit cost ratio – a case study. [Conference Proceedings]
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Abstract
In this paper, a Monte Carlo approach to arriving at a probabilistic distribution of Benefit Cost Ratio (BCR) is presented and discussed. BCR is the ratio of the benefits of a project relative to costs and is generally seen as an indicator of the overall value for money of a project. A BCR calculation generally forms an integral part of a project proposal and used by governments to assist them in making investment decisions on projects.
Project costs are increasingly being prepared by using a Monte Carlo approach whereby cost items and attendant risks are represented as probability distributions and then multiple simulations are computed to generate a probability distribution of the total cost of the project. However, the BCR is usually presented as a single number instead of a distribution, often because project benefits are still calculated as a single number.
In this paper, probabilistic estimation (Monte Carlo) method is presented and then probabilistic distributions of total costs and total benefits are used to generate a probabilistic distribution of the BCR using the Monte Carlo approach. Finally the application and implications of the BCR probabilistic distribution are discussed via a case study.
| Item Type: | Conference Proceedings |
|---|---|
| Additional Information: | This is an A-ranked conference in ERA2010 conference list |
| Subjects: | Q Science > QA Mathematics T Technology > T Technology (General) |
| Divisions: | Faculty of Science, Technology and Environment (FSTE) > School of Computing, Information and Mathematical Sciences |
| Depositing User: | Surya Prakash |
| Date Deposited: | 08 Dec 2015 03:00 |
| Last Modified: | 02 Jun 2016 02:10 |
| URI: | https://repository.usp.ac.fj/id/eprint/8617 |
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