Benefit-cost Ratio - Rationale

Rationale

In the absence of funding constraints, the best value for money projects are those with the highest net present value. Where there is a budget constraint, the ratio of NPV to the expenditure falling within the constraint should be used. In practice, the ratio of PV of future net benefits to expenditure is expressed as a BCR. (NPV-to-investment is net BCR.) BCRs have been used most extensively in the field of transport cost-benefit appraisals. The NPV should be evaluated over the service life of the project.