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    ROI Analysis

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    api-3809857
    This document presents a capital budgeting analysis for a proposed project with the goals of increasing production capacity, improving cycle times, reducing costs from accidents and defects, and improving quality. It estimates that the project will generate $1.575 million in total annual benefits in year 1, growing to $2.425 million by year 3. The total costs are estimated to be $1.65 million in year 0. The net present value is estimated to be $2.223 million and the return on investment is projected to be 66% in year 1, growing to 215% by year 3, with a payback period of 1.24 years.

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    ROI Analysis

    Uploaded by

    api-3809857
    1K views2 pages
    This document presents a capital budgeting analysis for a proposed project with the goals of increasing production capacity, improving cycle times, reducing costs from accidents and defects, and improving quality. It estimates that the project will generate $1.575 million in total annual benefits in year 1, growing to $2.425 million by year 3. The total costs are estimated to be $1.65 million in year 0. The net present value is estimated to be $2.223 million and the return on investment is projected to be 66% in year 1, growing to 215% by year 3, with a payback period of 1.24 years.

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    This document presents a capital budgeting analysis for a proposed project with the goals of increasing production capacity, improving cycle times, reducing costs from accidents and defects, and improving quality. It estimates that the project will generate $1.575 million in total annual benefits in year 1, growing to $2.425 million by year 3. The total costs are estimated to be $1.65 million in year 0. The net present value is estimated to be $2.223 million and the return on investment is projected to be 66% in year 1, growing to 215% by year 3, with a payback period of 1.24 years.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
    1K views2 pages

    ROI Analysis

    Uploaded by

    api-3809857
    This document presents a capital budgeting analysis for a proposed project with the goals of increasing production capacity, improving cycle times, reducing costs from accidents and defects, and improving quality. It estimates that the project will generate $1.575 million in total annual benefits in year 1, growing to $2.425 million by year 3. The total costs are estimated to be $1.65 million in year 0. The net present value is estimated to be $2.223 million and the return on investment is projected to be 66% in year 1, growing to 215% by year 3, with a payback period of 1.24 years.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
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    <Company Name>

    Capital budgeting—return-on-investment (ROI) analysis


    <Date>

    Data cell key


    User data entry or item description
    Formula cells: Totals are calculated and filled in automatically.

    Investment overview
    Project name: <Project name>
    Project sponsor: <Project sponsor>
    Date of request: <Date>
    General description of benefits: <Description of benefits>

    Cash flow and ROI statement


    YEAR
    BENEFIT DRIVERS
    0 1 2 3
    Greater margin driven by higher production capacity $500,000 $1,000,000 $1,250,000
    Improved cycle time benefits:
    Reduced energy cost due to less running time 125,000 125,000 125,000
    Reduced labor cost due to less running time 500,000 500,000 500,000
    Fewer accidents, resulting in less workers' compensation 100,000 100,000 100,000
    Improved quality benefits:
    Fewer defects, resulting in less rework 250,000 300,000 300,000
    Fewer customer returns, resulting in less reprocessing costs 50,000 75,000 75,000
    Reduced time spent handling customer complaints 50,000 75,000 75,000
    <Benefit driver>
    <Benefit driver>
    <Benefit driver>
    <Benefit driver>
    Total annual benefits $1,575,000 $2,175,000 $2,425,000
    Implementation filter 85% 90% 95%
    Total benefits realized $1,338,750 $1,957,500 $2,303,750
    Costs Year 0 Year 1 Year 2 Year 3
    Total $1,650,000 $125,000 $125,000 $125,000

    Benefits Year 0 Year 1 Year 2 Year 3


    Annual benefit flow ($1,650,000) $1,213,750 $1,832,500 $2,178,750
    Cumulative benefit flow (1,650,000) (436,250) 1,396,250 3,575,000

    Discounted benefit flow Year 0 Year 1 Year 2 Year 3


    Discounted costs $1,650,000 $108,696 $94,518 $82,190
    Discounted benefits 0 1,164,130 1,480,151 1,514,753
    Total discounted benefit flow (1,650,000) 1,055,435 1,385,633 1,432,563
    Total cumulative discounted benefit flow (1,650,000) (594,565) 791,068 2,223,632

    Initial investment Year 0 Year 1 Year 2 Year 3


    Initial investment $1,200,000 $0 $0 $0
    Implementation costs 400,000 0 0 0
    Ongoing support costs 0 100,000 100,000 100,000
    Training costs 50,000 25,000 25,000 25,000
    Other costs 0 0 0 0
    Total costs $1,650,000 $125,000 $125,000 $125,000

    ROI measures
    Cost of capital 15%
    Net present value $2,223,632
    Return on investment 66% 143% 215%
    Payback (in years) 1.24

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