Professional Documents
Culture Documents
Investment Analysis Tool Instructions
Investment Analysis Tool Instructions
Instructions
Introduction
This tool facilitates the analysis of a proposed IT investment by capturing assumptions on spending and benefits, and then computing Return On Investment (ROI)
and other metrics designed to help clarify whether the deal is a desirable one.
Prerequisites
None. No macros or special functions are used.
Steps and FYIs
1) Each deal requires a new copy of this workbook. Only blue cells should have information entered into them. Yellow cells are calculated.
2) Depending on the nature of the proposed investment, different assumptions may apply, both for the spending and the anticipated benefits.
3) The Assumptions block at the top right is meant to capture most of the key parameters so that these may easily be changed.
4) The assumptions that are highly specific to the particular example are contained in the lower half of the Assumptions block, and probably won't apply to all analyse
5) Other implicit assumptions are contained in the formulas themselves, such as costs/salaries rising each year by a given factor.
6) The most important assumptions, however, are contained in the rows under estimates for costs, and estimates for benefits. You should attempt
to capture every possible cost that is likely to ensue from the proposed investment
7) All costs/expenses must be entered as negative numbers
Maintenance
Each deal requires some modification of the sheet, most likely
Otherwise, no regular maintenance should be needed. All dates, for example, are triggered off the Implementation date in the Assumptions block.
Weaknesses/Still To Do
80
Break-even 65 66
60 point
49 49
40
20
0
2008 2009 2010 2011 2012
(20)
(40)
(50)
(60)
Net Incremental Benefits Cumulative Incremental Cash Flow