Financial calculations on demand

Geeky · ‎03-02-2019

Can anybody please explain how financials are calculated on a demand?

How to allocate certain amount to the demand

How ROI% is calculated?

How net present value is calculated etc? Please explain these calculations with example.

Sandeep V1 · ‎03-18-2019

Hi Srini,

I took even distribution for cost plans in my earlier calculations, that is why it is slightly off from the system NPV. But now that I see your data, the calculation is matching perfectly. Here is how it is done.

FY19 License cost planned cost = 4285. FY20 License cost planned cost = 5714

FY19 Resource cost plan planned cost = 5760. FY20 Resource cost plan planned cost = 6240

Total FY19 Planned cost = 10045

Total FY20 Planned cost = 11954. After applying discount rate, FY20 planned cost = 11954/1.1 = 10867

Total Planned cost = 10045 + 10867 = 20912

FY19 Benefit cost = 8823

FY20 Benefit cost = 21176. After applying discount rate, FY20 benefit cost = 21176/1.1 = 19250

Total Benefit cost = 19251 + 8823 = 28073

NPV = 28073 - 20912 = 7161

Let me know if this helps.

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sanjivsachdev · ‎03-14-2019

Create your demand

Add your cost plans - these really need to span more than one year

Make sure you have a Discount Rate

Click update NPV is calculated. This is the cost of the project in today's terms i.e. after stripping out the cost of capital which is the discount rate

Add Benefits, this needs to be greater than the costs you can't have negative IRRs

The NPV will be updated for the benefits and the IRR will then be calculated

Hope this helps.

Geeky · ‎03-14-2019

Now I got the the fields populated. Its considering calculations only if the fiscal period is starting from FY19Aug or later not before that.

But the calculation is not matching.

Present value of the future cash inflows = 30000/ (1+0.10) = 30000/1.10 = $27272.72

NPV = PV-C = 27272.72 – 22000 = 5272.727272727273

But in system it shows 7161 which is not matching with the calculated result.

Screenshot for Cost Plans

Sandeep V1 · ‎03-15-2019

Hi Srini,

Only the benefits in FY20 should be considered while calculating PV. You should exclude the benefits in FY19 as they are current year. Check what are the breakdowns in Fy20 and calculate the PV for those and see if it is matching.

sanjivsachdev · ‎03-15-2019

Benefits 30,000 /1.1 = 27,272

Costs 22,000/1.1 = 20,000

NPV = Benefits - Costs = 7,272

This is slightly different because the time scales are not exactly 1 year. In your screen shots both are over a year hence the impact of the discount rate is higher, reducing the total NPV.

You have to discount BOTH the costs and benefits.

Hope this helps, if so please mark accordingly.

Geeky · ‎03-15-2019

I was looking for the exact value with different duration. Can you do the maths with my example to get the exact value that is showing in the system??