Compute the return on investment and payback period

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Question - Case Study/Practical - Analysis for a change project that is being considered reveals that it will cost $70,000 to establish (in year 0), and that the recurring costs for the next 3 years will be $25,000 (in years 1, 2 & 3). There will be no benefits in year 0, but there will be $96,000 worth of benefits each year in years 1 through to 3. Using the formula above, calculate the payback period and the ROI. What is your recommendation?

Years

Benefits

Costs

0

$0

$70,000

1

$96,000

$25,000

2

$96,000

$25,000

3

$96,000

$25,000

TOTAL BENEFITS

$288,000

TOTAL COSTS

$140,000

Required -

Compute the payback period?

Compute the Return on Investment (ROI)?

Would you recommend it as a good investment? Justify your answer.

Reference no: EM132728290

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