Calculate ROI Net Present Value

Explanation

Use this function to calculate return on investment with the Net Present Value method for the defined Kaizen activity.

Prerequisites

This activity has the following prerequisites:

• A kaizen cost plan needs to be defined.
• The NPV return on investment method has to be selected.

System Effects

This activity will calculate the return on investment for the selected line item and evaluate whether it will be approved or not according to the required NPV ratio.

Window

Part Cost

Related Window Descriptions

Net Present Value (NPV)

Procedure

1. Open the Part Cost/Kaizen Cost tab.
2. Select a line with the NPV ROI Method, right-click and then click Calculate ROI.
3. The Net Present Value (NPV) dialog box appears.
4. In the ROI Period field, enter a return on investment period.
5. In the Financial Rate (%) field, enter a financial rate.
6. In the Cost Reduction field, enter a cost reduction value.
7. In the Production Rate field, enter a production rate. Now, the savings will be calculated, and displayed in the Saving field.
8. In the Depreciable field, enter a depreciable investment.
9. In the Sunk field, enter a sunk investment. Now, the total investment will be calculated, and displayed in the Total Investment field.
10. In the Required ROI field, enter a required return on investment.
11. Calculate the return on investment with the Net Present Value method to receive the result in the Earned Value and Net Present Value fields. If approved, the Approved check box will be selected.
12. Adjust a value by erasing the requested field value and clicking Get Defaults, if the default value is requested again. The default value will be shown, and a recalculation is done.