Unlike the quantification of benefits which may end up in meandering discussions, the quantification of costs is generally easier. Costs of tangible goods or services are easier to measure as they are usually the direct cost of the service/good. Indirect costs such as training, hiring/firing, adoption, process re-engineering should also be taken into account when developing a credible value model.

Fixed and variable costs are accounted for in the way they are calculated but otherwise, they will be treated the same. That is, they are either one-time or recurring.

When it comes to opportunity costs, it is slightly different. We never directly take into account the opportunity cost in a value model. We use it to consider two different investment alternatives. Here’s my rationale. Let’s say we are considering investment option A with a set of costs and benefits. That is its own value model with its calculated NPV, ROI, PBP, etc. With alternative B, we consider its own set of costs and benefits to derive its NPV, ROI, PBP, etc. We pick the one that has a better outlook, right? So, if we are compelled to pick alternative B despite its poor outlook, there has to be a logical reason for it. For instance, I pick option B because I need to comply with some regulations whereas I could have used the money to invest in A. So, the benefit of staying compliant (and hence staying in business or avoiding fines) outweighs any benefits that may have accrued from picking option A.