CAPITAL INVESTMENT DECISIONS

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1. Average annual profit =

  • Net profit per unit x replacement number
  • Investment cost + total disposal value / 2
  • Total cost of unit x replacement number
  • Total anual profit x life time until replacement (yrs) / life time until replacement (yrs)
  • Total annual profit / Average annual investment x 100
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2. Payback period (PP) graph - Headings down the vertical axis

  • Years: 0, 1, 2, 3, 4,
  • Year; Cash flow; Cumulative cash flow

3. Present Value (PV) =

  • Discount Factor (DF) - Cash Flow
  • Discount Factor (DF) x Cash Flow
  • Discount Factor (DF) / Cash Flow
  • Cash Flow x Discount Factor (DF)

4. Year 0 =

  • (Total investment); (Total investment)
  • (Total anual profit); (Total investment )

5. Total annual profit =

  • Investment cost + total disposal value / 2
  • Net profit per unit x replacement number
  • Total annual profit / Average annual investment x 100
  • Total cost of unit x replacement number

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