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.

View solution in original post

Sandeep V1 · ‎03-15-2019

Hi Srini,

You should apply the discount rate only to the benefit costs in the next year, for the current year you should not apply the discount rate. Check the benefit breakdowns, add current year benefit with next year discounted benefit, subtract this with planned cost.

Sandeep V1 · ‎03-15-2019

Hi Srini,

You should apply the discount rate only to the costs in the next year, for the current year you should not apply the discount rate. Check the breakdowns, add current year cost with next year discounted cost for both planned cost and benefits.

I used the same data as yours in my system and below is how the calculations done...

FY19 planned cost = 9428. FY20 planned cost = 12571, after discounting, it comes to 11428

Total planned cost = 20856

FY19 benefit cost = 8823. FY20 benefit cost = 21176.4, after discounting, it comes to 19251

Total benefit cost = 28074

NPV =28074-20856 = 7218.

sanjivsachdev · ‎03-15-2019

Hi, you are right, I was making my calculation rough & ready to illustrate the point.

Geeky · ‎03-15-2019

FY19 planned cost = 9428. FY20 planned cost = 12571, after discounting, it comes to 11428

FY19 benefit cost = 8823. FY20 benefit cost = 21176.4, after discounting, it comes to 19251

How did you calculate planned cost and benefit cost for the respective year? This is where exactly I am stuck. Do I need to divide the total cost with number of months and divide it equally with the reaming months of the respective fiscal year?

Sandeep V1 · ‎03-18-2019

Hi Srini,

You can see the monthly breakdown inside the respective cost plan and benefit plan. Just add all months' cost for each year from two cost plans and one benefit plan (per your example). Apply discount rate only to the future year. Then you will get the right NPV. Lemme know if this helps.

Thanks