Calculation of Present Value Farrokh Alemi Ph D

“Show Me the Cash” t e s t a co r st ity nt

Example of Present Value Interest rate Years till return If we assume a 6%

Present Value of IT Costs Year 1 Year 2 Year 3 Year 4 Year

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Calculation of Present Value Farrokh Alemi, Ph. D. 0

Present Value 1

“Show Me the Cash” t e s t a co r st ity nt e er tun me t In por est p nv o i r f o o rs a Ye fore in be eiv c e re g th h s ca 2

Example of Present Value Interest rate Years till return If we assume a 6% interest rate, receiving $1, 000 in 5 Years is worth $747 today. 3

Present Value of IT Costs Year 1 Year 2 Year 3 Year 4 Year 5 Cost in 000 $88, 167 $70, 999 $47, 335 $35, 501 $28, 399 Present value? $83, 176 $63, 188 $39, 743 $28, 120 $21, 221 Assume 6% Interest Rate or 0. 06 4

Present Value of IT Costs Year 1 Year 2 Year 3 Year 4 Year 5 Cost in 000 $88, 167 $70, 999 $47, 335 $35, 501 $28, 399 Present value? $83, 176 $63, 188 $39, 743 $28, 120 $21, 221 Shows returns in each year 5

Present Value of IT Costs Year 1 Year 2 Year 3 Year 4 Year 5 Cost in 000 $88, 167 $70, 999 $47, 335 $35, 501 $28, 399 Present value $83, 176 $63, 188 $39, 743 $28, 120 $21, 221 6

Present Value of IT Costs Year 1 Year 2 Year 3 Year 4 Year 5 Cost in 000 $88, 167 $70, 999 $47, 335 $35, 501 $28, 399 Present value $83, 176 $63, 188 $39, 743 $28, 120 $21, 221 7

Present Value of IT Costs Year 1 Year 2 Year 3 Year 4 Year 5 Cost in 000 $88, 167 $70, 999 $47, 335 $35, 501 $28, 399 Present value $83, 176 $63, 188 $39, 743 $28, 120 $21, 221 8

Present Value of IT Costs Year 1 Year 2 Year 3 Year 4 Year 5 Cost in 000 $88, 167 $70, 999 $47, 335 $35, 501 $28, 399 Present value $83, 176 $63, 188 $39, 743 $28, 120 $21, 221 9

Present Value of IT Costs Year 1 Year 2 Year 3 Year 4 Year 5 Cost in 000 $88, 167 $70, 999 $47, 335 $35, 501 $28, 399 Present value $83, 176 $63, 188 $39, 743 $28, 120 $21, 221 10

Present Value of IT Costs Year 1 Year 2 Year 3 Year 4 Year 5 Cost in 000 $88, 167 $70, 999 $47, 335 $35, 501 $28, 399 Present value $83, 176 $63, 188 $39, 743 $28, 120 $21, 221 11

Present Value of IT Costs Year 1 Year 2 Year 3 Year 4 Year 5 Cost in 000 $88, 167 $70, 999 $47, 335 $35, 501 $28, 399 Present value $83, 176 $63, 188 $39, 743 $28, 120 $21, 221 12

Present Value of IT Costs Year 1 Year 2 Year 3 Year 4 Year 5 Cost in 000 $88, 167 $70, 999 $47, 335 $35, 501 $28, 399 Present value $83, 176 $63, 188 $39, 743 $28, 120 $21, 221 Present Value of 5 -year Cost of Investment $235, 450, 000 13