How to calculate NPV and ROI?

ROI = (Total Benefit - Total Cost) and
NPV = (Total Benefit - Total Cost)/(1 + i)^n
ROI stands for Return On Investment
NPV stands for Net Present Value

Both ROI and NPV are calculated based on the Budget and Financial Benefit associated with a Portfolio Management Request. These values are calculated automatically when the Request is saved, or when one of the following fields is updated:
· Budget
· Financial Benefit
· Discount Rate (this field is disabled by default).
Following are the formulas used for calculation of ROI and NPV:
ROI = (Total Benefit – Total Cost)
NPV = (Total Benefit – Total Cost)/(1 + i)^n where i = annual discount rate

Note: Discount Rate is a percentage value, therefore a value of 10 means 10% and it is used as 0.1 in the above formula.n = number of the period, see below : Example First, ITG calculates per month so the discount rate is 10%/12 or .8333% per month. Then it matters when your costs actually: hit May June July August 3000 3000 3000 0 0 0 45000 45000
NPV = 3000/(1.008333)^0+3000/(1.008333)^1+42000/(1.008333)^2+45000/(1.008333)^3
NPV = 3000 + 2975 + 41308 + 43893 = 79226
Following are additional details related to these formulas:
· Since Cost and Benefit are monthly values (in Budget and Financial Benefit), NPV is also calculated as a monthly value. Therefore, 1/12 of the discount rate is used.
· n is the number of months in the future.
· We apply the above formula to each month and then take the sum of all monthly NPV values to arrive at the total NPV.
· For all values, we are taking a "projected" total, which means actual values are used when it is available, otherwise planned values will be used.