FLOOD04322

• County: Statewide
• Community: State of Colorado
• Stream Name: All
• Basin: Statewide
• Title: Benefit-Cost Analysis for Urban Drainage Planning
• Date: 3/1/1974
• Prepared For: UDFCD
• Prepared By: CSU
• Floodplain - Doc Type: Educational/Technical/Reference Information

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- 43 -

present worth or annual worth before comparison,using compound

interest factors, which account for the time value of money.

In this example, all benefits and costs were converted to

present worth. See the last two columns of Tables 7 and 8.

Step 16 - Compare the Benefits with the Costs and Select the

Most Economical Alternatives.

Evaluation of the alternatives and selection of the most

economical one is possible with a number of methods. The bene-

fit to cost ratio and the net benefit methods are the easiest

to apply and proper use of either will yield the correct answer.

The benefit to cost ratio method is sometimes used incorrectly,

however, as selection of the most economical alternatives is

sometimes based on the maximum benefit to cost ratio. Selection

of the most economical alternative can only be insured after an

incremental benefit to cost ratio analysis has been performed.

For simplicity, the net benefit method is recommended. It

will save time initially and in the long run, especially if any

last munite changes are made which require a rerun of the

benefit-cost analysis. The results are not affected by the

classification of certain items as costs or "disbenefits". The

net benefit is simply the value of the benefits minus the value

of the costs. Present or annual worth dollars can be used.

The most economical alternative is the one with the largest

positive net benefit, which should be recommended, based on the

the economic evaluation. Table 9 summarizes the procedure.
~ Leonard Rice Consulting Water Engineers, Inc.