An attempt to study the financial implications of replacing a traditional biofuel cookstove with an improved one has been made. The role of several factors influencing the cost of an improved cookstove has been discussed. The capital cost of a popular portable metallic cookstove design in India has been expressed in functional form and the fuel savings have been quantified in terms of two cookstove performance indicators-overall thermal efficiency of a pot-cookstove combination and specific fuel consumption of a cookstove. An LP model is proposed for biofuel resource allocation in a rural setting. Expressions for discounted payback period and the net present value of benefits have been derived Results of some typical numerical calculations indicate that it is financially quire attractive to replace a traditional cookstove with an improved one. The results of the financial analysis are relatively more sensitive to the economic life of the cookstove and price(s) of the biofuel(s). Copyright (C) 1996 Elsevier Science Ltd.