The cost-benefit table considers the (monetary) costs of a certain alternative and their probabilities.

In the given example, there is a 30% chance idea 1 will cost 1000, a 40% change it will cost 2000 and a 30% chance it will cost 3000. This results in an expected pay-off of (0.30*1000+0.40*3000_0.30*4000)-(0.30*1000+0.40*2000+0.30*3000) = 700.

To use this technique, enough quantitative data should be already available.

Executing the Method

  • List Cost and Benefits

    For each alternative, list the costs and benefits and the probability an alternative will cost a certain value and reap a certain benefit.

  • Multiply and Sum

    For each alternative, multiple the probabilities per cost and benefit, and sum these values to calculate the expected payoff.

  • Select Alternative

    The alternative with the highest pay-off is usually the most attractive.