 Step-By-Step Guide
Resources
Step-By-Step Guide
How to Calculate Payoff Points
Your supervisor has asked you to determine the payoff point - the point at which the initial investment is paid off - for each project. The following step-by-step will help you complete your work.
The following step-by-step will help you complete your work.
- Review Abigail Vincent’s email. Be sure you understand what you are being asked to do in this task. Contact your mentor if you have any questions.
- Organize your team and create a plan for completing this task. Be sure each team member knows what s/he needs to do and is aware of any deadlines.
As in previous tasks, you will need to complete the following process for each of the four projects. You are about to complete the Payoff calculations. Resources and detailed instructions for completing the calculations are found in the Financial Analysis Archive located on the Resources page of this task. The work you will perform in this task begins on Step 7: Calculate Payoff Point.
- Using the cost of capital figures the Board of Directors decided on, calculate the Present Value for each year of the project.
- If you need help with these calculations, refer back to Step 6: Calculate Net Present Value → Calculating Present Value in the Financial Analysis Archive.
- Capture these results on your Excel spreadsheet for the project.
- Based on the Present Values you calculated in Step 3, calculate the Net Present Value for the entire project.
- Refer back to the Financial Archive if you need help completing this calculation.
- Capture this calculation on your Excel spreadsheet.
- Determine the start-up costs. The investment proposals your supervisor gave you in Task 1 contained information about how much money the hospital would have to pay in order to implement the project. For each project add the start up costs and come up with a start up cost figure for each project. Add this information to your Excel spreadsheet. On your spreadsheet, be sure to include a breakdown of each start-up cost as well as the total of all start-up costs.
- Calculate the payoff point. As necessary, adjust the payoff points you find based on what is recommended in the resources.
- Write a description of the work you have done in this task. As in the previous tasks, you are continuing to prepare for your final presentation. Take some time with your team and discuss what you did in this task. Be specific about the calculations you performed and what those calculations mean. Based on the results which proposal comes out on top?
- Review your work. Check your math and double check any formulas you may have used on your spreadsheet. Be sure the formulas are set up correctly and you entered the correct values.
- Submit your work. Follow the instructions on the Submit Your Work tab and submit your work to your mentor.
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