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Cost-Benefit Analysis

Cost Benefit Cash Flow

User note: Complete yellow cells only.
Tangible Benefits
Rate/Hr Hrs/Wk Year 1* Year 2
Increased Profits (input individual years)
Material Savings (input individual years)
Labor Savings**
$0 $0
$0 $0
$0 $0
$0 $0
Totals $0 $0

Costs
Rate/Hr Total Hrs Year 1 Year 2
Software Acquisition (input individual years)
Hardware Acquisition (input individual years)
Project Process**
Project Management $0
Business Analysis $0
Systems Analysis & Design $0
Development & Implementation $0
Desk/LAN/VS/Operations $0
System testing $0
Business Contacts' Time $0
Annual System Maintenance Yrs 2-5** $0 $0
Totals $0 $0

* Assumes 6 month Project Process.

** Assumes a 5% increase per year.
These assumptions may need to be changed to fit your business assumptions.

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Cost-Benefit Analysis

Year 3 Year 4 Year 5 Totals

$0
$0

$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0

Year 3 Year 4 Year 5 Totals

$0
$0

$0
$0
$0
$0
$0
$0
$0
$0 $0 $0 $0
$0 $0 $0 $0

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Cost-Benefit Analysis

Cost Benefit Summary and Performance Analysis

Year Annual Costs Annual Benefits Annual Cash Flow Overall Cash Flow
1 $0 $0 $0 $0
2 $0 $0 $0 $0
3 $0 $0 $0 $0
4 $0 $0 $0 $0
5 $0 $0 $0 $0
Totals $0 $0 $0 $0
Note: Values in this table reflect End of Period.

DISCOUNT RATE (%) :

NET PV: $0
IRR: Err:523

Net PV (Net Present Value)

Returns the net present value of the project (or investment) based on Annual Cash Flows and
the above stated Discount Rate. The net present value of an investment is today's value of
each Annual Cash Flow (Annual Cost - Annual Benefit), summed.

IRR (Internal Rate of Return)

IRR is the interest rate of return based on the Annual Cash Flow. IRR requires an initial
investment (negative value). So, if the project pays for itself before the end of the first year,
your IRR cannot be calculated (without a negative value representing the initial investment).
If all of the Annual Cash Flows are positive numbers (no apparent initial investment), an error
will appear (i.e., #NUM!).

Break-Even Analysis
The purpose of Break-Even Analysis is to discover when the project will pay for itself. The
break even point can be calculated using the Break-Even Ratio followed by the Break Even
Point formulas.
In the following ratio formula, use the Annual and Overall Cash Flow values from the Break-
Even Year, which is the first year that Annual Cash Flow is a positive number.

Break-Even Ratio = AnnualCashFlow −OverallCashFlow

AnnualCashFlow

Break-Even Point = Break-Even Year - 1 + Break Even Ratio

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Cost-Benefit Analysis

nt) based on Annual Cash Flows and

of an investment is today's value of
, summed.

sh Flow. IRR requires an initial

tself before the end of the first year,
e representing the initial investment).
o apparent initial investment), an error

n the project will pay for itself. The

n Ratio followed by the Break Even

all Cash Flow values from the Break-

w is a positive number.

w −OverallCashFlow
w

- 1 + Break Even Ratio

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