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by fitzgeraldtd

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Assume a proposed system has a useful life of 5 years, one-time Development costs of $75,000, recurring Operation and
Maintenance costs of $30,000 per year, and tangible benefits of $55,000 per year. If the Discount factor is 8%, what is the
overall NPV of this alternative? Overall ROI?

19 replies

by deadly ernest

plug these into your calculator, or (better yet) find the nearest school kid to do it for you.

{(75,000 x 0.92) + (30,000 x 5)} divide by 5

then compare with 55,000

or try this

{(75,000 divide by 5) x 0.92} + 30,000

and compare with 55,000

essentially, IF you get all the tangible benefits stated all you save is the 8% discount on the original purchase or 8% of 25,000 per year. But you haven't yet factored in the costs involved with the change over and other change disruption add on.

In effect, you're messing everything up and making a lot of changes for a potentially possible saving of $2,000 per year if the benefits are realised. I doubt the change over will cost you less than $10,000 in staff disruption alone.

Hey and if anyone sees any problem with the above maths, don't mention it.

by cg it

In it's simplest form, basic ROI is recovering an intital investment as well as projected "profit" from that investment.

Total investment is $225,000.00.
Recouping that investment using a nebulous term tangible benefit of $55,000.00 per year
equates to $275,000.00.

a difference of $50,000.00 or about 20% return on investment [ROI]. eg invested $225,000.00 and received $225,000.00 initial investment as well as profit of $50,000.00 for a total of $275,000.00.

by the scummy one

what is this 2 or 3 times recently :0 :0 :0
Has the sky fallen :0 :^0

I was hoping to see more slamming, but the other post was -- helpful :(

by cg it

is that they show up on the search engines so now all those little buggers end up here asking dumb questions.

It's like those password hack questions. As long as they post, it will show up on search engines.

by deadly ernest

knowledge and they DON'T use the search engines first. One earlier was asking about a problem with over 68,000 Google hits on the problem - sheet, the first four had the answer and I'd never used asp.net in my life. these types are as bad as the ones we can answer with read the flipping manual.

by deadly ernest

the early formulas were accurate, but I deliberately messed up the later one with the figures to give a false answer. hell, if they want to cheat, give them the wrong answer, then they may pay attention in the summer classes.

by cg it

questions in the Q&A forum. While I can't believe someone would sit around all day long thinking up questions to post on a forum. I guess there are those people with nothing else worthwhile going on.

by shasca

Anybody else get 7 as their answer too?

No wait, it's blue. Yeah, the answer is blue. Glad I checked my work a second time.

by shasca

No credit if it's not included you know......

by oh smeg

The correct answer id 42 don't you know anything? :D

by cg it

(a+b)10[(c+d)15]
__________________
7

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