KEVOS® WORKOS · Money
Return on Investment and NPV
Is this investment financially worthwhile?
Evaluates an investment with simple return and payback, then discounts the cash flows to give net present value and discounted payback.
Open the calculatorRuns in your browser. No account needed.
How this tool works
Inputs, units and where to find them
| Input | Unit | Typical source |
|---|---|---|
| Initial investment | $ | Quotations for purchase, installation and commissioning |
| Annual gross benefit | $ | Measured or estimated annual saving or extra contribution |
| Annual ongoing cost | $ | Ongoing maintenance, licences, consumables and support |
| Evaluation period | years | Useful life or the evaluation period your organisation uses |
| Discount rate (your approved rate) | % | Your organisation’s approved discount or hurdle rate (finance) |
Method and formulas
- Annual net = benefit − ongoing cost
- Simple ROI = annual net ÷ investment
- Annuity factor = (1 − (1 + r)⁻ⁿ) ÷ r
- NPV = annual net × annuity factor − investment (end-of-year cash flows)
- Discounted payback = year in which cumulative discounted cash flow turns positive (interpolated)
Limitations
- Level annual cash flows; no growth, ramp-up or residual value
- Pre-tax; no financing, depreciation or tax effects
- Benefits must be real cash, avoided cost or used capacity
Typical uses
- Equipment and software purchases
- Improvement projects with a measurable annual benefit
- Comparing investments over the same period
Who it is for
- Business owners
- Operations and engineering managers
- Finance partners
What you get
- POSITIVE NPV, MARGINAL or NEGATIVE
- Simple ROI and payback
- NPV and discounted payback
Interpreting the result
- NPV above zero means the investment earns more than the discount rate
- A positive undiscounted total with negative NPV is marginal: the money comes back too slowly
- Use the sensitivity table to see how a benefit shortfall changes NPV
References
- Brealey R., Myers S. and Allen F., Principles of Corporate Finance (McGraw-Hill), net present value
WORKOS tools are screening and decision-support utilities. Verify important financial, engineering, safety, legal or operational decisions using appropriate professional standards and your organisation’s approved data.
