FAST ROI for IT Calculator – “Quick” Version (Software)
Publisher: Resource Management Systems, Inc.
Version 1.0, Add-on for Microsoft Excel 2003
FAST ROI is a software tool that enables IT and business professionals to generate three of the most common financial metrics in under 90 seconds. This simple, one-screen software program, enables anyone to perform calculations that challenge even the experts.
No. FAST ROI is designed for use by those of us with little or no finance or economics training. Although anyone can use FAST ROI, even experts find this tool easier to use than setting up their own spreadsheets to do the calculations.
All you need to have is Microsoft Excel 97 or 2000 installed and operating in your PC.
The two main benefits are knowledge (information you may never have had before) and time (you need less than two minutes to get the results):
The data requirements are straightforward:
Evaluating anything that costs money and for which you expect a financial return. The main use is to quickly generate three common financial metrics for a project: Payback, NPV, and IRR. Once you become comfortable with using financial indicators to evaluate projects, you’ll think of dozens of additional uses:
Here’s another example in terms that you might be familiar with. "Suppose I buy a house this year for $250,000 and sell it in three years for $350,000. My mortgage rate is 6%. How much is this ‘investment" worth?"
As the financial metrics show: the value of your home investment is $43,867 (Remember, you have mortgage interest costs, time has passed, and you have to subtract the original "Year 0" investment.). Also, the rate of your investment’s return is 11.87%.
Maybe you decide that 11.87% is too low. You wonder how much you would need to ask for to get a 20% return. To get the answer, all you do is keep increasing the amount in "Year 3" until IRR reads 20% (you don’t have to reenter the other numbers). You find that you would have to sell the house for $432,000 in three years to get a 20% return on your investment. As you can see, the value of your investment has grown to $112,716 at this rate. (Note: FAST ROI will tell you to hit the "recalculate" button to clear the previous IRR calculation.)
Yes. If you are using the same analysis period and discount rate, simply enter the new project cost and benefit numbers. If the periods or rates are different, just make the simple changes and start anew. You might find it helpful to print (or use the "export" function) the results of each for your records.
In the interest of simplicity, we decided to limit this version of FAST ROI to one-year projects ("Year 0") with an analysis (i.e., benefit) period up to 10 years. Could we have made the project and analysis periods longer? Yes. But that facts are:
Ordinarily, the discount rate is provided by an organization’s finance or budget department. If you have no instructions about what to use, consider a current interest rate from a major financial institution (e.g., the Federal Reserve Board; for US government agencies, it would be the Office of Management and Budget).
Always check with your Finance or Budget organization. Show them FAST ROI and ask if the calculations are acceptable.
Remember, your project and benefit numbers that you enter represent your best estimates of what will happen in the future. FAST ROI uses these numbers to help calculate the financial performance metrics. The financial metrics are reasonable estimate of future performance results.
The term "Questionable" appears under two conditions:
RMS (Resource Management Systems, Inc.) is a specialist in Information Technology (IT) investment decision-making. Since 1985, RMS has been helping organizations make more informed investment selection decisions and improve the management of performance to ensure improved performance and results.
RMS delivers real-world training (e.g., IT cost-benefit analysis), products (e.g., FAST ROI), and consulting services to Fortune 1000 corporations and some of the largest government organizations.