this report assesses the state-of-the-art in cost-benefit analyses of interactive systems and suggests an approach for developing improved methodology. cost-benefit analyses are distinguished from analyses of system performance in that the latter are directed at optimizing system performance at a given level of investment, while the former are directed at justifying the investment itself. methods of analyzing the performance and costs of computer systems in general and interactive systems in particular are discussed. with this information it is shown how cost-effectiveness analyses may be performed. the next crucial step is to conduct benefit analysis, an ill-defined art. the results of benefit analysis must be combined with cost-effectiveness analysis in order to perform the desired cost-benefit analysis. an experimental methodology is suggested for better performing benefit analyses of interactive systems. a more rigorous formulation of the cost-benefit procedure is then outlined no attempt is made in this report to actually perform such an analysis