ROI Basis and Types of Analysis
All project return on investment (ROI) estimates are project predictive metrics. ROI analysis depends on contrasting costs and benefits (project-related monetary outflows and inflows). Because they are based on future benefits estimates, which are often unreliable, the accuracy of ROI metrics can be highly variable.
Most ROI methods are based on the time value of money, assuming a discount rate (or interest rate) that makes a sum of money in the future less valuable than the same sum of money today. The formula for this is: PV = FV/(1 + i)n, where: PV is the present value, FV is the future value, i is the periodic interest rate, and n is the number of periods. (If the period is a year and the interest rate is ...
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