ROI & NPV in PPMC

Return on Investment (ROI) – 투자수익율 Return on investment is based on the attached budget and financial benefit. ROI = Total Benefit – Total Cost Net Present Value (NPV) – 현재 순가치 Net present value (NPV) is return on investment (ROI), discounted to its current value, based on a specified discount rate and the time allowed for the ROI to be realized. It is based on the attached budget and financial benefit. For any particular future month: NPV = (Benefit – Cost) / (1 + i / 12)^n where: n is the number of periods (months) from the current month. Benefit and Cost are as specified for month n. i is the annual discount rate. For example, if the Discount Rate field (which by default is disabled) is specified as 6 to represent a 6% annual rate, the formula uses 0.06 for the value of i, then divides that by 12 to reflect the 12 months in a year. HP Portfolio Management computes and reports total NPV, which is the sum of these values for all months—past, current, and future—using each month’s particular Benefit and Cost, but with only future months discounted. In other words, past and current months use only their individual calculations of (Benefit – Cost) in the summation. Furthermore, actual rather than projected values are used where available for past months. NPV for past and current months is meaningful for projects that are underway.