Simple NPV & ROI calculation (Example 001)

Case: A company invests $15000 and receives a $11000 cash benefit at the end of the first year and a $12100 cash benefit at the end of the second year. (Assume Cost of Money = 10%)

Calculation:

t=0 t=1 t=2
Costs
Onetime investment (15000)
Benefits
Cash 11000 12100
F (15000) 11000 12100
P (15000) 10000 10000
NPV 20000 – 15000 = 5000
ROI 5000/15000 = 33.33%

NPV = S P = 10000 + 10000 – 15000 = 5000
ROI = NPV/Initial investment = 5000/15000 = 33.33%

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