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How do I set up an ROI calculator in Excel?
Does anyone have any input on putting together a return on investment
calucation in excel? |
#2
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How do I set up an ROI calculator in Excel?
Hello katem70, You didn't say which ROI equation you wanted to use. Here are the most common equations used. Excel has builtin functions for NPV and P calculations. ROI EQUATIONS 1. STANDARD EQUATIO ROI = Net Benefits/Cost * 100% Net Benefits = Benefits – Costs Costs = Initial and Recurring/Ongoing Project Costs Time Period = The standard ROI equation is usually calculated for th first year of the investment. _______________________________ 2. RETURN ON INVESTMENT CAPTIA ROI = NOPAT/Invested Capital * 100% NOPAT = Net Operating Profit after Taxes Invested Capital = Same as costs above (initial and recurring projec costs) _______________________________ 3. RETURN ON INVESTMENT USING NET PRESENT CAPITA ROI = NPV (Benefits)/PV (Costs) * 100% NPV of Net Benefits = Present Value of Benefits – Present Value o Costs PV (Costs) = Present Value of Costs This equation accounts for the time value of money or the “interest derived from investing in an investment with similar risk. The Presen Value is discounted at the cost of capital of the company or the “rate the company could borrow money in the marketplace given its risk level. _______________________________ 4. FINANCIAL DEFINITIO ROI = Profits/Firm Assests * 100% Profits = The ROI financial definition is used to estimate the retur of a company’s profits or net income. Net income in turn is defined a the gross income less deductions for depreciation, interest payments and taxes. Firm Assets = Company resources including cash, accounts receivable inventory and properties _______________________________ 5. BEST VIE ROI = Total Net Benefits/Costs * 100% A typical use of this equation would be for a software vendor whose d not include recurring or operating costs. Net Benefits = Benefits – Initial Costs Costs = Initial Costs If you are familiar with Excels worksheet functions it won't b difficult to compute your ROI. You just need to decide which of th equations best represents your needs, Sincerely, Leith Ros -- Leith Ros ----------------------------------------------------------------------- Leith Ross's Profile: http://www.excelforum.com/member.php...fo&userid=1846 View this thread: http://www.excelforum.com/showthread.php?threadid=49243 |
#3
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How do I set up an ROI calculator in Excel?
katem70 wrote:
Does anyone have any input on putting together a return on investment calucation in excel? --------------------------------- Ask Excel's Help system about the XIRR() function. Bill |
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