Roi Illustration
14
ILLUSTRATION OF A TYPICAL ROI CALCULATION OF AN IT PROJECT 0 1 2 3 COSTS M1 M2 M3 M4 FIXED COSTS HARDWARE 100 0 0 0 COTS 400 0 0 0 DEV 2500 2500 2500 2500 OPEX BADNWIDTH 50 50 50 50 OTHERS 300 INDIRECT FTE 500 500 500 500 Investment 3850 3050 3050 3050 Returns 1900 2000 2000 2100 RETURNS COST SAVINGS 500 500 500 500 REDUCED COSTS 300 300 300 300 REVENUE INCREASE 100 200 200 300 PRODUCTIVITY INCREASE 1000 1000 1000 1000 NPV LET'S ASSUME THE DISCOUNTING IS THE PLR - 10% 35 DF= 1 1.35 1.8225 2.460375 DCF PV 3850 2259.259 1673.525 1239.648 TOTAL PV= 11235.01 DCF OF PV RETURNS 1900 1481.481 1097.394 853.5284 TOTAL PV= 11423.63 NPV= 188.61 IS THIS INVESTMENT GOOD O IRR FOLLOWS THE SAME PATTERN, JUST THAT THE INTEREST RATE HERE IS THE OPPO FOR BREAK EVEN ANALYSIS, LOOK AT THE GRAPH
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Transcript of Roi Illustration
ILLUSTRATION OF A TYPICAL ROI CALCULATION OF AN IT PROJECT0 1 2 3 4
COSTS M1 M2 M3 M4 M5FIXED COSTS
HARDWARE 100 0 0 0 0COTS 400 0 0 0 0DEV 2500 2500 2500 2500 2500
OPEXBADNWIDTH 50 50 50 50 50OTHERS 300
INDIRECTFTE 500 500 500 500 500
Investment 3850 3050 3050 3050 3050Returns 1900 2000 2000 2100 2800
RETURNSCOST SAVINGS 500 500 500 500 500REDUCED COSTS 300 300 300 300 300REVENUE INCREASE 100 200 200 300 1000PRODUCTIVITY INCREASE 1000 1000 1000 1000 1000
NPVLET'S ASSUME THE DISCOUNTING IS THE PLR - 10% 35DF= 1 1.35 1.8225 2.460375 3.321506DCF PV 3850 2259.259 1673.525 1239.648 918.2581TOTAL PV= 11235.01
DCF OF PV RETURNS 1900 1481.481 1097.394 853.5284 842.991TOTAL PV= 11423.63
NPV= 188.61 IS THIS INVESTMENT GOOD OR BAD??
IRR FOLLOWS THE SAME PATTERN, JUST THAT THE INTEREST RATE HERE IS THE OPPORTUNITY COST OF CAPITAL OF THE FIRM
FOR BREAK EVEN ANALYSIS, LOOK AT THE GRAPH
5 6 7 8 9 10 11M6 M7 M8 M9 M10 M11 M12
50 0 0 0 100 0 00 0 0 0 0 0 0
2500 500 500 500 500 500 500
100 100 100 100 100 100 100
500 500 500 500 500 500 5003150 1100 1100 1100 1200 1100 11003800 4800 5800 6800 11800 13800 21800
500 500 500 500 500 500 500300 300 300 300 300 300 300
2000 3000 4000 5000 10000 12000 200001000 1000 1000 1000 1000 1000 1000
4.484033 6.053445 8.172151 11.0324 14.89375 20.10656 27.14385702.4925 181.7147 134.6035 99.70629 80.57074 54.70852 40.52483
847.4513 792.9369 709.7275 616.3661 792.2789 686.3433 803.1285
IRR FOLLOWS THE SAME PATTERN, JUST THAT THE INTEREST RATE HERE IS THE OPPORTUNITY COST OF CAPITAL OF THE FIRM
1 2 3 4 5 6 7 8 9 10 11 120
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InvestmentReturns
1 2 3 4 5 6 7 8 9 10 11 120
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InvestmentReturns
ILLUSTRATION OF A TYPICAL ROI CALCULATION OF AN IT PROJECT0 1 2 3 4 5
COSTS M1 M2 M3 M4 M5 M6FIXED COSTS
HARDWARE 100 0 0 0 0 50COTS 400 0 0 0 0 0DEV 2500 2500 2500 2500 2500 2500
OPEXBADNWIDTH 50 50 50 50 50 100OTHERS 300
INDIRECTFTE 500 500 500 500 500 500
3850 3050 3050 3050 3050 31501900 2000 2000 2100 2800 3800
RETURNSCOST SAVINGS 500 500 500 500 500 500REDUCED COSTS 300 300 300 300 300 300REVENUE INCREASE 100 200 200 300 1000 2000PRODUCTIVITY INCREASE 1000 1000 1000 1000 1000 1000
NPVLET'S ASSUME THE DISCOUNTING IS THE PLR - 10% 36DF= 1 1.36 1.8496 2.515456 3.42102 4.652587DCF PV 3850 2242.647 1649.005 1212.504 891.5469 677.0426TOTAL PV= 11081.98
DCF OF PV RETURNS 1900 1470.588 1081.315 834.8387 818.4693 816.7498TOTAL PV= 11054.96
NPV= -27.021 IS THIS INVESTMENT GOOD OR BAD??IRR=
IRR FOLLOWS THE SAME PATTERN, JUST THAT THE INTEREST RATE HERE IS THE OPPORTUNITY COST OF CAPITAL OF THE FIRM
FOR BREAK EVEN ANALYSIS, LOOK AT THE GRAPH
6 7 8 9 10 11M7 M8 M9 M10 M11 M12
0 0 0 100 0 00 0 0 0 0 0
500 500 500 500 500 500
100 100 100 100 100 100
500 500 500 500 500 5001100 1100 1100 1200 1100 11004800 5800 6800 11800 13800 21800
500 500 500 500 500 500300 300 300 300 300 300
3000 4000 5000 10000 12000 200001000 1000 1000 1000 1000 1000
6.327519 8.605426 11.70338 15.9166 21.64657 29.43933173.8438 127.8263 93.98995 75.39301 50.81637 37.36497
758.5912 673.9934 581.0288 741.3646 637.5144 740.5059
IRR FOLLOWS THE SAME PATTERN, JUST THAT THE INTEREST RATE HERE IS THE OPPORTUNITY COST OF CAPITAL OF THE FIRM
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Row 13Row 14
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Row 13Row 14
Total No. of months 12Month 0 1 2 3 4Expense(investment) 10 0 0 45 3Interest rate p.a. 24%Present Value 10 0 0 42.40451 2.771536Net Present Value 89.2944
No. of months 24Months 0 1 2 3 4Hardware 20AMC/AMC Of Hardware 12% 2.4Liscence 35AMC/AMC Of liscence 22% 7.7Implementaion cost 31.25 0 0 31.25 0Discount rate 17.50%Bandwidth 3 3 3 3 3Sum total of each month 56.65 45.7 3 34.25 3Present value 56.65 45.04312 2.914378 32.79423 2.831199Net present value 261.5569
5 6 7 8 9 10 11 120 18 0 5 6 0 11 0
0 15.98348 0 4.267452 5.020532 0 8.846893 0
5 6 7 8 9 10 11 12 13 14
0 31.25 0 0 31.25 0 0 0 0 0
3 3 3 3 3 3 3 3 3 33 34.25 3 3 34.25 3 3 3 3 3
2.790504 31.40033 2.710861 2.671895 30.06568 2.595637 2.558328 2.521556 2.485312 2.449588
15 16 17 18 19 20 21 22 238
0.9612
2.640 0 0 0 0 0 0 0 0
3 3 3 3 3 3 3 3 33 11.96 17.64 3 3 3 3 3 3
2.414379 9.486972 13.79137 2.311757 2.278529 2.245778 2.213498 2.181681 2.150323
Investments
No. of months 24Months 0 1 2Hardware 20AMC/AMC Of Hardware 12% 2.4Liscence 35AMC/AMC Of liscence 22% 7.7Implementaion cost 31.25 0 0Discount rate 17.50%Bandwidth 3 3 3Sum total of each month 56.65 45.7 3Present value 56.65 45.7 3Net present value 285.7
Returns
Months 0 1 2No. of months 24Cost savings 0 0 20Salary cost of employees 2500 2500 2500Productivity value addition 0 0 0Profitability from customers 0 0 0Sum total of benefits 0 0 20Present value of benefits 0 0 19.42918Net present value 68455.573796
3 4 5 6 7 8 9 10 11 12
31.25 0 0 31.25 0 0 31.25 0 0 0
3 3 3 3 3 3 3 3 3 334.25 3 3 34.25 3 3 34.25 3 3 334.25 3 3 34.25 3 3 34.25 3 3 3
3 4 5 6 7 8 9 10 11 12
20 20 20 20 20 20 20 20 20 202500 2500 2500 2500 2500 2500 2500 2500 2500 2500
0 0 0 0 0 750 750 750 750 7500 0 0 0 0 0 0 0 0 1000
20 20 20 20 20 770 770 770 770 177019.14991 18.87466 18.60336 18.33596 18.0724 685.7865 675.9292 666.2136 656.6376 1487.71787
13 14 15 16 17 18 19 20 21 228
0.9612
2.640 0 0 0 0 0 0 0 0 0
3 3 3 3 3 3 3 3 3 33 3 3 11.96 17.64 3 3 3 3 33 3 3 11.96 17.64 3 3 3 3 3
13 14 15 16 17 18 19 20 21 22
20 20 20 20 20 20 20 20 20 202500 2500 2500 2500 2500 2500 2500 2500 2500 2500
750 750 750 750 750 750 750 750 750 7502000 3000 4000 5000 6000 7000 8000 9000 10000 110002770 3770 4770 5770 6770 7770 8770 9770 10770 11770
2294.771 3078.316 3838.862 4576.909 5292.945 5987.451 6660.899 7313.75 7946.456 8559.463
23
0
333
23
2025
7.512000
12027.58621.001
