A company has a process improvement initiative that is projected to increase revenue by $150,000 USD non-compounded per year. The budgeted cost of the initiative is $200.000 and supporting the initiative will cost $30.000 for years two and three.
What is the projected return on investment over the first 3 years?
To calculate the return on investment (ROI) over the first 3 years, we first determine the total benefits and costs. The revenue is $150,000 per year, so over 3 years, the total revenue is $150,000 * 3 = $450,000. The costs include an initial $200,000 and $30,000 for each of the second and third years, which totals $200,000 + $30,000 + $30,000 = $260,000. Therefore, the ROI is calculated as (Total Benefits – Cost of the Investment) / Cost of the Investment. Substituting the values, ROI = ($450,000 - $260,000) / $260,000 = $190,000 / $260,000 ≈ 0.73, or 73%.
Answer is 73% 450,000-260,000/260,00 =.73 convert into % as the answer is in percentage.
BABOK p 287: Return on Investment = (Total Benefits – Cost of the Investment) / Cost of the Investment.
There is a difference between calculating planned investments and comparing change initiatives. Read the paragraph 'Return on Investment'.
(150k x 3) - (200k + 30k + 30k) / (200k+30k+30k) = 0.73
How is the answer A pls?
The formula to calculate ROI is: Return on Investment = (Total Benefits – Cost of the Investment) / Cost of the Investment.
Page 277 BABOK V3
B. 73%
Me too
I want to understand the formula for this
Here's the logic behind this: You invested 200.000 initially plus 30.000 second year and 30.000 third year Total invested: 260.000 Revenue yearly 150.000...in three years 150.000 x3 = 450.000 total revenue 450.000 Difference between invested and gained -260.000 + 450.000 = 190.000 hence, Money gained /money invested = 190.000 / 260.000 = 0,73 *100 = 73%