when you anticipate that the facility will demonstrate a return on the investmen

Question

when you anticipate that the facility will demonstrate a return on the investment (ROI): Capital costs of construction budget: $1,000,000 (5-year note) Capital cost of equipment budget: $1,000,000 (5-year) O&M budget: $500,000/year Forecasted revenue generation: $1,000,000/year Useful life of plant: 15 years minimum Loan interest rate: 5% (5 year note) Operating hours: Monday through Friday: 0800hrs – 1700hrs Available personnel: 4 staff members ($47/hr includes benefits).   Need to see the formula for the ROI and how long will it take for the ROI to be realized.

Explanation / Answer

Capital costs of construction 1,000,000 Capital cost of equipment budget 1,000,000 O&M budget       500,000 Forecasted revenue generation 1,000,000 Useful life of plant                  15 Loan interest rate 5% Hrs 3,285 Avaialbe personnel                    4 total hrs          13,140 Forecasted revenue generation 1,000,000 labor cost       617,580 interest amout          50,000 Depreciation       200,000 O&M budget       500,000 Total expenses    1,367,580 return     (367,580) ROI -37%

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