Advice 1: How to calculate the payback period of the equipment

Term of payback of the equipment – an economic indicator that should count in the analysis and planning of economic activities. He characterizes the time in which the money spent on the acquisition of another means of production will return in full through the use of the unit.
How to calculate the payback period of the equipment
To start, determine the amount that the company is ready to allocate for the purchase of new equipment. It will engage directly the cost of acquisition, and costs associated with installation and commissioning. For example, if you plan to acquire an additional pipeline, which will allow to redistribute the workload, the parameter "Capital investments" calculate the price of the device, the amount of delivery, the cost of installation and start-up. However, if all the preparations was carried out by a staff member of the company, and therefore the organization was able to avoid additional costs, over and above the purchase cost to add nothing.
Calculate the amount of gross income derived from the use of equipment. For example, if a new furnace in a month is to bake 500 loaves of bread and sold at a price of 20 p per unit of product, and raw material costs from the calculation of a loaf will be 5 R, then gross profit will be equal to R 7500 (7500 = (20 R – 5 R) * 500). While the costs of the salary Fund are not taken into account, but if the service equipment is employed additional staff, payments for newly hired employees need to be considered. Tax deductions should be ignored – they will in any case depend on the total amount of income. Thus, gross income is the difference between the sales price and production costs in trade – the amount of allowances.
Put the indicators in the formula:T = K / VD, where T is the period of return; – capital expenditures; VD – gross income.When calculating the period of payback can take any length of time. If you select quarter, the amount of gross income is also taken per 3 calendar months.
Instead of yield, you can substitute the value of saving, which will become possible after the introduction of additional units of equipment, because according to popular wisdom, "Saved – then earned".

Advice 2: How to calculate payback

To think that the ability to calculate the return should have only economists and businessmen, is fundamentally wrong. Each family is investing money in apartments, houses, cars and Bank deposits. All it is capable of after some time, grow in value and benefit to their owners. Therefore, to talk about return on investment and can be with friends, with colleagues, and neighbors on the landing. And it is not surprising if they don't know the phrase "return on investment", because not everyone can be economists and businessmen.
How to calculate payback
You will need
  • calculator
  • - handle
  • - a sheet of paper
For home use the payback calculation is extremely simple and unpretentious. To calculate the payback, you need the value of the invested funds divided by the amount of profits. The obtained value will show the period of time during which there will be payback.
For example, we bought an apartment on the first floor of a residential building over 3 000 000 RUB 600 000 we spent for repair and bureaucratic procedures and the arrangement of the adjacent territory. Then, by submitting the Declaration, handed over the premises to the lessee, who is to pay the monthly utilities and the amount of 40 000 rubles.
Thus, our investments amounted to 3, 600, 000. And the monthly profit of the project is 40 000 rubles. For the full payback of the investment will be required to surrender our space for rent for (3 600 000 / 40 000 90 months, or 7.5 years.
Another example. Each invites us to engage in cargo transportation. They will need the car GAZelle, which have to be purchased. Suppose that the value of the monthly profits from the cargo after all expenses for repairs and fuel are expected to be about 40 000 RUB. let's Say we buy a used GAZelle for 300 000 rubles.
Thus, the ROI will come through the (300 000 / 40 000 a) 7.5 months.
In addition, the ROI can be compared, choosing more lucrative opportunities. Compare the income from the GAZelle from the previous example, with income on Bank deposits at a rate of 10.5% per annum.
For ease of comparison, take the amount of the Deposit equal to the cost of the GAZelle, 300, 000. Assume that, under the terms of the Bank, interest is paid at maturity. Thus, after 1 year, the amount of our investment will grow to (300 000 * 10,5%) 31 500 rubles. And we will have 331 500 rubles.
For 12 months of work in freight, we will receive (40 000 x 12) 480 000 RUB. From a mathematical point of view, this means that in our examples it is more profitable to invest in transportation, and not to the Bank.
I hope that now you will make financial decisions with greater rationality.

Advice 3: How to calculate shipping cost

When the need arises to calculate the sum for delivery of any cargo to a certain place, many will be lost. Nothing complicated about it. You only need to stick to a certain plan of action.
Transportation is a necessary part of any business
You will need
  • Internet access
  • calculator
  • Notepad and pen
  • scales (to determine weight)
  • the tape or tape measure (to determine size of the load)
Define the distance between points of delivery. If the transportation is long distance and by car, this distance should be doubled, as the road back is also included in the cost of delivery.
Define the distance between the points <strong>shipping</strong>
Find out the cost of transportation over one kilometre. The easiest way to find out is to consult the Internet or call the firm to engage in the transportation of cargo. You can also use various printed publications or ask friends who recently ordered the delivery of the goods.
Find out <b>price</b> carriage per kilometer
Determine the weight of the load. If it exceeds the permissible limits, then the cost will be somewhat higher because the package will be transported under any other conditions. For example, other transport, able to carry more weight.
Pay attention to the dimensions. For oversized loads also will have to pay because of a change of transport.
Determine how urgently you need to deliver a package. In case it needs to be done as quickly as possible, it is best to use a courier service. Almost all firms now have the opportunity to do it. But the price of shipping will increase significantly.
Determine the need for additional services, under which pay increases. In different firms the range of additional services varies considerably. This can be packaging, protection of goods, insurance, registration documents of the firm. Often this situation occurs when the transport of bulky and heavy cargoes.
Calculate the total cost of delivery. Distance is multiplied by the cost of one kilometer of the carriage, is then multiplied by the weight of the parcel and added an incremental cost for overweight, oversized cargo or extra services (if any).

Advice 4: How to calculate the payback of the project

Development projectusually ends with the calculation of his return. If for any reason a project is recognized as unpromising, that changes of economic indicators (for example, reduced the cost of materials). How can you calculate the payback period of the project and what will it take?
How to calculate the payback of the project
You will need
  • calculator, pen, notebook, economic indicators of the project implementation
Calculate the payback period of the project, that is the time interval after which the project starts to bring profit.T = K/N, where
T – payback period, annual capital expenditures, P – project income.For example, in the first year of implementation of the project , the company implemented the purchase of new equipment worth 15 million rubles. In the second year of implementation of the project the company had a major overhaul workshops to improve the work of the division. For repairs, spent 2 million rubles. In the first year the profit from the project amounted to 5 million rubles, and the second – 17 million rubles. If the cash flows during the year, quarter or month are not the same, is to calculate the payback period for each of these time intervals. In the first and the second year he will be, respectively:
T1 = 15/5 = 3 years
T2 = 2/17 = 0.11 year or in about a month, the project will pay off for the same amount of profit.
Calculate the simple rate of return or indicator, which indicates which part of the investments pays off with profits.PNP = PE, where
PNP – simple rate of return, NP – net profit, OF the investment costs.
In our example, the ordinary rate of profit in the first and second year respectively:
ПНП1 = 5/15 = 0.33 million,
ПНП2 = 17/2 = 8.5 million rubles.In other words, in the second year of implementation of the project , it can be argued that the investment paid for itself, the project is promising.
Compare the results obtained according to the simple rate of return and payback period. In our example, in the second year of implementation of the project investments begin to work for profit. Approximately two years and one month, the project will fully pay for itself, and therefore, it can be argued, the project investments were not invested in vain.
Often these indicators are not sufficient to calculate the payback of complex projects that are implemented gradually in different areas (e.g., construction and sale items). In this case metrics are calculated for each specific activity and with changes of monetary receipts in a separate reporting period.

Advice 5: How to find the payback period

Period payback is the time interval over which the investment in the project will pay for itself in full. Typically, this time interval is measured in months or years. But how to find the period of payback , and that it may need?
How to find the payback period
You will need
  • table showing the time (e.g. year) and appropriate capital investment in the project, calculator, Notepad and pen
Make a table of the investment (investments) and projected revenues from the project for each year. For example, the company plans to implement the project "X", the value of which is estimated at 50 million rubles. In the first year of implementation, the project has required additional investments in the amount of 10 million rubles. In the second, third, fourth and fifth year it is planned that the project will bring profit in the amount of 5, 20, 30 and 40 million rubles respectively. Then the resulting table will look like the following:
The time period and the Investment and profit
0 - 50 million rubles
1 - 10 million rubles
2 + to 5 million rubles
3 + 20 million rubles
4 + 30 million rubles
5 + 40 million rubles
Determine the discounted accumulated flow, that is, the amount of attachment that varies according to the planned income. For example, at the enterprise the project "IKS" the impact of the project or the discount rate is 10%. Calculate the accumulated discounted flow before the first positive value according to the formula:
NDP = B1 + B2/(1 + SD) + B3/(1 + SD) + V4/(1 + SD) + B5/(1 + DM) where
The NDP is the accumulated discounted flow V1-5 – attachments for a certain period of time, SD is the discount rate.
НДП1 = - 50 – 10 / (1+0.1) = - 59.1 million rubles.
In this way we hope НДП2,3,4 and so on, until a zero or positive value.
НДП2 = - 54.9 million rubles
НДП3 = - 36.7 million rubles
НДП4 = - 9.4 million rubles
НДП5 = 26.9 million rubles
Thus, investments into the project will pay off fully only in the fifth year of the project.
Calculate the exact period of payback of the project according to the following formula:
T = TC + (NC/PN),
Where T – period of payback, TC is the number of years prior to payback, NS – unrecovered cost of the project at the beginning of the year of payback, that is for 5 year (last negative amount NPD), MON – cash flow in the first year of payback (40 million rubles).
In our example, T = 4 + (9.4 / 40) = 4,2 year.
In other words, the project will pay for itself in 4 years, 2 months and 12 days.
Payback period allows you to determine at the stage of development in which cases (with known costs and amount of profit) the project will be profitable.

Advice 6: How to calculate payback period

The rate of return on investment is a key criterion for the attractiveness of an investment project. The payback period enables the investor to compare different options for the business and choose the most suitable according to his financial possibilities.
How to calculate payback period
Remember that payback period is the length of time from the initial stage (project implementation) up to the moment when it will be repaid. The payback time is considered the time after which the cash flow from the project becomes positive value and remains so.
The method of calculating the payback period of the investment is to determine the period that will be needed to reimburse the initial cost of the investment. The payback period is an indication, will be reimbursed or not the initial investment during the life cycle of the project.
There are two ways of calculating the payback period. If revenues from the project for all years are the same, the payback period can be calculated as follows:
PP = I/CF where:
PP – payback period,
I – the initial investment in the development of the project,
CF – the average annual value of cash receipts from the project.
If cash flow by year is not the same, then the calculation of the payback period is carried out in several stages. First, find an integer number of periods over which the cumulative amount of proceeds of the project will be the closest to the original investment amount but surpass it. Then, calculate outstanding balance – the difference between the amount of investment and the amount received receipts. Then uncovered for the remainder divide by the amount of cash receipts of the following period.
Note that these methods have some disadvantages. They ignore the difference in the value of money in time and the existence of cash receipts after the end of the payback period. In this regard, the calculated discounted payback period, which refers to the duration of the period of time from the initial moment to the moment of recoupment taking into account discounting.
Remember that discounting is determining the present value of cash flows we will receive in the future. In other words, is transferring future value of money at present. In this case the discount rate is determined on the basis of percentage in safe investments based on interest on borrowed capital, according to expert estimates, etc.
Discounted payback period is the most appropriate criterion for evaluating the attractiveness of an investment project, because it allows you to put in the project some risks, such as reduced income, increased costs, the emergence of alternative the most beneficial areas of investment, thereby reducing its nominal efficiency.

Advice 7: How to determine the payback period of capital cost

Payback - one of the indicators reflecting the economic performance of the company. It characterizes how well and successfully used investment.
How to determine the payback period of capital cost

The essence of the payback period of capital investments

In economic analysis there are different approaches to the definition of the payback period. This figure is used in the framework of a comparative analysis in the determination of the most favorable option for investment. It should be noted that it is only used in complex analysis, make the payback period for the main parameter of efficiency is not quite right. Definition of payback period as a priority is only possible if the company is focused on rapid return on investment.

On the other hand, under other equal conditions, preference is given to projects that have the shortest payback period.

During implementation of the project with borrowed money, it is important that the payback period was shorter than the period of use of external borrowings.

The indicator is a priority in that case, if the investor's principal is the most rapid return on investment, for example the choice of ways of financial improvement of bankrupt enterprises.

Under the payback period is the period during which the reimbursed capital costs. This is achieved due to additional income (for example, more efficient equipment) or savings (for example, the introduction of energy efficient production lines). If we are talking about the country, then compensation is due to the increase in national income.

In practice, the payback period is the time period during which the profits of the company, secured capital investment equal to the investment amount. It can different - a month, a year, etc. Importantly, the payback period did not exceed normative values. They differ depending on the specific project and industry focus. For example, to upgrade equipment at the enterprise normative one, and in the construction of the road is another.

The calculation of the payback period should be performed with respect to the time lag between capital investments and the effect of them, as well as changes in prices and other factors (inflation, rising cost of energy, etc.). According to this approach, the payback period - the time period through which when considering a discount rate would level a positive cash flow (discounted income) and negative (discounted investment).

The calculation of the payback period

In its simplest form, the payback period is calculated as the ratio of capital investments to profit from them. However, this approach does not account for the temporal estimation of the investment costs. This leads to nekorrektno, a conservative estimate of the payback period.

More correct is the analysis of investment projects taking into account inflation, alternative investment options, maintenance of the loan capital.

Therefore, the payback period is equal to the sum of the number of years that preceded the year of payback, and relationships unrecovered cost at start of year payback to cash flow during year of payback. The calculation algorithm is as follows:

- calculation discontinuing cash flow based on discount rate;
- calculation of cumulative discounted cash flow as the sum of costs and revenues on the project - it is calculated before the first positive value.

It only remains to substitute these values into the formula.

Advice 8: How to calculate the payback period

For the evaluation of investment project efficiency in financial management uses various methods and criteria. The easiest way to assess the attractiveness of the project is to calculate the payback period.
How to calculate the payback period


Calculation of simple payback period

Method simple payback period is one of the easiest ways of evaluation of the project. To calculate this index it is enough to know the net cash flow for the project. Based on this calculated balance of accumulated cash flows. When choosing among several investment projects to implement the adopted project, whose payback period is the least.

Assume that the initial investment in the project amounted to 180 million rubles. The project will be implemented within 5 years, it will annually generate cash flows:

1 year: 40 million rubles

2 year: 30 million rubles

3 year: 50 million rubles

4 year: 70 million rubles

5 year: 90 million rubles

It is necessary to calculate the simple payback period.

Using the data presented, it is necessary to make the analytical table. The payback period for the project is calculated by summing the annual cash flows as long as the amount of future cash inflows is equal to the magnitude of the initial investment costs.

The table shows that the balance of the accumulated cash flow takes positive in the period between 3rd and 4th year of implementation of the investment project. To calculate the exact payback period will help the following formula:

In this example, the payback period is: 3 years 10 months

The main disadvantage of this method is that the calculation is not used, the procedure of discounting, and thus does not take into account the decrease in the value of money over time.

The calculation of the discounted payback period

Discounted payback period is the period for which the discounted cash flows to cover the initial costs associated with the investment project. Discounted payback period is always less than simple, as over time, the value of cash is always decreasing. The procedure of discounting allows to take into account when calculating the cost of capital employed.

Assume that the initial investment in the project amounted to 150 million rubles. The discount rate is 15%. The project will be implemented within 3 years, it will annually generate cash flows:

1 year: 30 million rubles

2nd year: 120 million rubles

3 year 15 million rubles

It is necessary to calculate discounted payback period.

The presented data it is also necessary to make the analytical table. In the first stage is calculated discounted cash flow in each period. Discounted payback period for the project is calculated by summing the annual discounted cash flows as long as the amount of future cash inflows is equal to the magnitude of the initial investment costs.

The table shows that the balance of the accumulated discounted payback period does not take a positive value, therefore, in the framework of the project payback is achieved.



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