Benefit-cost ratio

Signature

BCR = PV_B / PV_C

Inputs
Inputs	Definition	Unit
`PV_B`	Present value of all included monetised benefits under the stated perspective	currency in the stated price year
`PV_C`	Present value of all included resource costs under the stated perspective	the same currency and price year as PV_B

Output
`BCR`	Present-value monetised benefits per unit of present-value resource cost	ratio

Maps the present values of monetised benefits and resource costs to measures of net social value and relative return.

PV_BPV_C

Positive resource costs
Present-value resource costs are greater than zero because the ratio is undefined when the denominator equals zero.
Consistent cost-benefit classification
Items are classified consistently as resource costs or monetised benefits under the stated perspective.
Common monetary basis for the BCR
Benefits and costs use the same currency, price year, time horizon and timing convention.

Benefit-cost ratio of an option
An option has present-value benefits of £251,505 and present-value resource costs of £133,168. Its benefit-cost ratio is approximately 1.89.
```
BCR = 251505 / 133168 = 1.89
```

Ranking mutually exclusive options by BCR alone
The option with the highest benefit-cost ratio may not produce the greatest net present value because programme scale can change the ranking.

HM Treasury Green Book for the BCR
HM Treasury. The Green Book: appraisal and evaluation in central government.
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