Task 4 MIT
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The document defines three financial metrics used to evaluate investments: ROI measures profits compared to costs, calculated as (returns - costs) / costs; NPV compares the present value of cash inflows to initial investment, with a positive value indicating an investment should be made; and payback period is the number of years required to recover the initial investment from annual cash inflows. Examples are provided to illustrate how each metric is calculated.
Task 4 MIT
- 1. Nur Ilyana Bt Ismarau Tajuddin P68499
- 2. ROI (Return of Investment) The money that we invest in the company and its return as profit or… its mean investment gains compare favorably to investment costs. (Return From Investment - Initial Cost of Investment) / Initial Cost of Investment. Example,If company invest rm 100,000 and end up receive of rm 120,000 (20,000 benefit).. The annual ROI will be 20% .
- 3. NVP (Net Present Value) is used to analyze an investment decision and give company management a clear way to tell if the investment will add value to the company. Formula : The present value of an investment expected cash inflows minus the initial investment. If the result show positive value, the investment should be made , otherwise it should not.
- 4. Payback Period The amount of time required to recover the cost of an investment. By other mean, which is the initial cash outflow of an investment is expected to be recovered from the cash inflows generated by the investment. Payback Period = Initial Investment / Annual Cash Inflows. Example, a $10000 investment which returned $1000 per year would have a 10 years payback period