Simple ROI
Company XYZ is investing in new technology, resulting in the following costs, savings and revenue:
	Costs:
	Equipment	135,000
	Training	7,000
	Annual Support	4,000
	Savings:
	Personnel	6,000
	Additional revenue	4,500
	ROI	7.2%	(savings + income) / cost
Do you have enough information to recommend this project? Why or why not? What advantages / disadvantages exist with using ROI?
Response:
NPV, IRR, Payback
You are comparing 2 projects with the following cash flows. Which would you recommend, based upon NPV with a 10% discount rate?
	PROJECT A		PROJECT B
	0	-22500		0	-20000
	1	6000		1	10000
	2	6000		2	8000
	3	6000		3	2000
	4	6000		4	500
	5	6000		5	500
	NPV	$ 245		NPV	$ (2,143)
	IRR	10%			3%
	Payback	3.8	years		3.0	years
Which project would you recommend and why? Describe advantages / disadvantages of each of the valuation techiniques in the example.
Response:
Cost / Benefit
ABC Co is considering a project that will result in the following costs and potential productiivity improvements:
	New Volume		30,000
	Old Volume		35,000
	Current Staffing Level		20
	Staff Savings		(3)
	Average Personnel Cost per FTE		$ 30,000
Interpret the result of a staff savings of 3 and convert to a financial figure.
Response:
GOAL Co is considering a new inventory forecasting system that will result in the following costs and inventory savings:
	System Cost			180,000
	Inventory Reduction			500,000
	1% Reduction in Inventory Damage per Quarter			20,000
	Reduction in Borrowing Costs @ 5%			25,000
	TOTAL Annual Savings			45,000
	Payback			4	years
Explain the rationalization for the numbers used and approving this investment.
Response:
The IT team at GOAL Co is developing new systems to improve productivity, with the following expected return on time invested:
	FTE on Team			20
	Weeks Required for Change			7	per FTE
	Total Time Investment			140
	Work Weeks per Year			44
	Savings in Future Development Times			10%
	Return on Time Spent			132	man-weeks
How would you explain the result to GOAL Co's management team?
Response: