Presentor

- Azam
- Suhail

1. CBA
Determine CBA: divide [costs] /
[benefits]
If the answer is 1, it was not
feasible/not worth.

CBA HIBISCUS

CBA CONSTANTLAND

Total Cost
= Operating Cost + Construction
Cost per year = 245,800 + 286,000
= 531,800
CBA
=
= 1.42 > 1.0 not feasible.

CBA (per year)= cost / benefit

= 48,000 + (300 x 12) /
(10,000 x 12)
= 51,600 / 120,000
= 0.43 <1.0
feasible

Constantland has better CBA than Hibiscus.

Thus, we prefere for the CBA Constantland.

2. ROI

compare the costs of a project (investment), with the value

of its results:
Am I getting my expected return?
Evaluate one investment vs. another
ROI = [(Payback - Investment)/Investment)] x100

If the ROI is near to 100% or more,

therefore the investment is
considered to be highly returned.

ROI
ROI HIBISUCS

ROI CONSTANTLAND

Operating Cost
= x 100

Operating Cost
= x 100

= x 100

= x 100

=31.08%

=33.32%

If the ROI is near to 100% or more,

therefore the investment is
considered to be highly returned
Thus, we prefer Constantland ROI.

TCO (TOTAL COST OF OWNERSHIP)

all costs of owning and operating an
asset over its expected useful life.

Ensures a comprehensive analysis of long term effects and

helps account for hidden costs

Companies that rely solely on TCO

end up following a strategy that
minimizes expenditure rather than
maximizes return!
Determine which option has the
lowest TCO

TCO HIBISUCS

TCO CONSTANTLAND

Total Cost of Ownership

Total Cost of Ownership

= x 100

= x 100

= x 100

= x 100

= 68.92 %

=470% ROI over 3 yrs.

PP( PAYBACK PERIOD)

The length of time taken to
repay the initial capital cost

PP HIBISUCS

PP CONSTANTLAND

Formulae
=

Formulae
=

Total cost
=

Total cost
=

= 3.89

= 5.98

= 3 months to payback the

investment.

=6months to payback the

investment.

ARR( ACCOUNTING RATE OF

RETURN)
Shows profitability
A comparison of the profit
generated by the investment with
the cost of the investment
Average annual return or
annual profit
ARR =
-------------------------------------------Initial cost of investment

ARR HIBISUCS

ARR CONSTANTLAND

Formulae

Formulae

= x 100%

= x 100%

==x 100%

= x 100%

=16.72%

=30.83%

If the ARR % is higher, therefore the

investment is considered to be highly
returned
Thus, we prefer Constantland ARR.

NPV (NET PRESENT VALUE)

How much would you need to invest
today to earn x amount in x years
time?
Value of money is affected by
interest rates
Future Value
PV = ----------------(1 + i)n

NPV HIBISUCS

NPV CONSTANTLAND

Net present value

Net present value

=RM 694,444.44 , in 2 years

=RM 60558.38 in 3 years

If the NPV is higher, therefore the

investment is considered to be highly
returned.
Thus, NPV Hibiscus gain more profit.

CF (CASH FLOW)
Basically comparing profitability vs.
risk

CF HIBISUCS

CF CONSTANTLAND

Cash flow

Cash flow

RM29442.00 in 3 years.

RM710 in 3 years.

IRR (INTERNAL RATE OF

RETURN)
Helps measure the worth of an investment
Allows the firm to assess whether an
investment in the machine, etc. would yield a
better return based on internal standards of
return

IRR HIBISUCS

IRR CONSTANTLAND

Total IRR
NPV for this project is not equal to =RM710
0

PI ( PROFITABILITY
INDEX)
Engaging NPV / Initial capital cost
Net Present Value
Profitability Index =
--------------------Initial
Capital Cost

PI HIBISUCS

PI CONSTANTLAND

= Net Present Value / Capital Cost = Net Present Value / Capital Cost
= 2.84

= 0.2407

If the PI is higher, therefore the

investment is considered to be highly
returned.
Thus, PI Hibiscus gain more profit.

Hibiscus

Constantland

CBA = 1.42 > 1.0 not feasible

CBA = 0.43 <1.0 feasible

Operating Cost = 31.08%

Operating Cost= 33.32%

Total Cost of Ownership

=68.92 %

Total Cost of Ownership

=470% ROI over 3 yrs

PP
= 5.98
6months to payback the
investment.

PP
= 3.89
3 months to payback the
investment.

ARR
= 16.72%

ARR
= 30.83%

NPV
=RM 694,444.44 , in 2 years

NPV
=RM 60558.38 in 3 years

Cash Flow
=RM29442.00 in 3 years.

Cash Flow
=RM710 in 3 years.

NPV = 0

NPV = RM710

PI = 2.84

PI = 0.2407