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1 e C P M 1 5 : P o r t f o l i o M a n a g e m e n t f o r P r i m a v e r a P 6 W e b A c c e s s Capital Budgeting C o l l a b o r a t i v e P r o j e c t M a n a g e m e n t

2 e C P M 1 5 C a p i t a l B u d g e t i n g Copyright 214 CPM Solutions Ltd. For additional copies please contact us: CPM Solutions Ltd. Suite #2 417 Still Creek Drive Burnaby, British Columbia Canada, V5C 6C6 P: F: All rights reserved. No part of this manual may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission of the creator. CPM Solutions Ltd. provides industries with Project Management and Asset Management product, services, and training. Visit our website for more information: Oracle and Primavera are registered trademarks of Oracle and/or its affiliates. All other company or product names may be trademarks of their respective owners. This publication was created by CPM Solutions Ltd. and is not a product of Oracle Corporation. Disclaimer CPM Solutions Ltd. has made every effort to ensure that accuracy and correctness of this publication, but may not be held responsible for any loss or damage arising from any information in this publication. Since Oracle Corporate reserves the right to upgrade, improve the functionality or design of their products; then this software may operate differently than described in this publication. P6 R8.x October 22 nd, P a g e

3 e C P M 1 5 C a p i t a l B u d g e t i n g ECPM15 PORTFOLIO MANAGEMENT: CAPITAL BUDGETING TABLE OF CONTENTS Introduction... 3 Section 1: Present Value and Future Value... 3 Time Value of Money... 3 Future Value... 4 Present Value... 6 Cost of Capital, r... 6 Present and Future Value of Multiple Cash Flows... 7 Present And Future Value Annuities... 8 Using Present Value and Future Value in Capital Budgeting... 9 Section 2: Capital Budgeting... 1 Net Present Value... 1 Benefit and Limitations of Net Present Value Example: Net Present Value Return on Investment Benefits and Limitations of Return on Investment Example: Return on Investment Payback Period Benefits and Limitations of Payback Period Discounted Payback Period Example: Payback Period Section 3: Using Capital Budgeting in Primavera P P a g e

4 e C P M 1 5 C a p i t a l B u d g e t i n g INTRODUCTION Evaluating financial performance of a project or a group of projects can help managers determine whether the projects will be accepted or rejected. This process is called Capital Budgeting. In Primavera P6, managers can calculate the return on investment, net present value, and payback period to compare projects against one another. Financial analysis can be done at any point during a project s lifecycle: initiation, planning, execution, monitoring and controlling, and closing. By examining a project s financial performance during each phase, managers can determine whether predictions were correct, spending is under control, or if an investment is yielding the return it promised. The purpose of using financial analysis tools is to calculate the value of each project. This may be in numerical or percentage form. This ebook is designed to establish a basis of knowledge about capital budgeting tools in Primavera P6 and how you can use these tools to evaluate portfolios. SECTION 1: PRESENT VALUE AND FUTURE VALUE The first section of this book explains how the value of money is used to calculate the Present and Future Values of capital investments. These values will be used in conjunction with capital budgeting tools to help managers evaluate portfolio and project profitability and financial performance. TIME VALUE OF MONEY The essential concept of the Time Value of Money is that a dollar valued today is worth more in the future. This happens because you invest money that earns interest over a period of time. From this concept, we can derive the conclusion that the sooner you earn money, the more it is worth in the long run. Therefore, to receive the maximum value from an investment you will want to earn returns as quickly as possible. We can also use the Time Value of Money concept in reverse to say that money today was worth less in the past. Here is an example of the time value of money: You have $1, that can earn 1% annually (per year). How much is it worth in one year? Answer: $1,*(1.1) 1 = $1,1. $1, today is worth $1,1 in one year. You have earned $1 over the year due to the time value of money. In that example, we calculated the future value of the money (ie., how much it would be valued at over a period of time). We can also calculate the present value of money over time 3 P a g e

5 $ Value e C P M 1 5 C a p i t a l B u d g e t i n g (ie., how much the money was worth at a specified time in the past). The future value and present value are used to calculate the value of a project using our financial analysis tools. If you were to calculate the example for each succeeding year, you would see that the value of $1, grows exponentially. Below is a graph depicting the upward curve of the time value of using a 1% interest rate annually applied to $1, for 1 years. 3 Time Value of Money Value FUTURE VALUE The Future Value (FV) is the dollar value of money or an asset at a specified period in the future that is equal to the specified value today. You have already seen the formula used to calculate the FV. FV = PV * (1 + r) n Where FV = Future Value, the dollar value in the future PV = Present Value, the dollar value today r = Interest rate n = Number of periods Example: A company requires $5, to purchase a piece of equipment. How much will the company owe to the bank if it borrows at 5% annually and intends to pay the total value back in 4 years? 4 P a g e

6 e C P M 1 5 C a p i t a l B u d g e t i n g First, create a timeline: 5% 1 5% 5% 5% $5,? PV = $5,, r = 5%, n = 4 FV = $5, * (1 +.5) 4 = $6, The firm will have to pay back the bank an additional $1, But, what happens if I need to pay interest more than once a year? If the firm pays interest semi-annually, quarterly, monthly, or daily, you can adjust the formula to find the correct FV of the capital. New formula: FV = PV * (1 + r/m) n*m Where m = Number of compounding periods per year Example: If the company in the previous example had to pay interest semi-annually, what would they pay back to the bank? 2.5% 2.5% 1 2.5% 2.5% 2.5% 2.5% 2.5% % 4 $5,? PV = $5,, r = 5%, n = 4, m = 2 FV = $5, *(1 + (.5/2)) 4*2 = $6,92.14 The firm will have to pay back an additional $1,92.14 Note that when we calculate the Future Value, we calculate the value to t=n, where n equals the number of years. On the other hand, when we calculate the Present Value, we calculate the value to t=, which is at the beginning of the investment. 5 P a g e

7 e C P M 1 5 C a p i t a l B u d g e t i n g PRESENT VALUE The Present Value (PV) is the dollar value of money or an asset a specified period in the past that is equal to the specified value today. PV = FV / (1 + r) n Or, PV = FV / (1 + r/m) n*m Where PV = Present Value, the dollar value in the past FV = Future Value, the dollar value today r = Interest rate n = Number of periods m = Number of compounding periods per year Example: A company has purchased a piece of equipment worth $2, today. How much did the company put away 5 years ago in the bank at 4%? 4% 4% 4% 4% 4% ? $2, FV = $2,, r = 4%, n = 5 PV = $2, / (1 +.4) 5 =$16, To have $2, in 5 years, the company must invest $16, at 4%. COST OF CAPITAL, R The Interest Rate used in these formulas is also known as the Discount Rate because it is used to discount the dollar amount to the specified time. When capital budgeting, we use the firm s Cost of Capital as the discount rate. The Cost of Capital represents how much it costs the firm to finance a capital investment. The Cost of Capital is derived from the firm s capital structure that includes the cost of debt and the cost of equity. The cost of debt is created by financing long-term debt. The cost of equity is created as a combination of selling preferred and common stock to shareholders or using the company s equity to finance capital. Each of these stakeholders specifies a rate that must be paid back if 6 P a g e

8 e C P M 1 5 C a p i t a l B u d g e t i n g they invest in the firm, called the Required Rate of Return. The Required Rate of Return specified by the stakeholders is combined to create a Weighted Average Cost of Capital. In essence, the Cost of Capital is the rate that must be provided back to the investors and is used as the discount rate to be applied to potential investments that the stakeholders are financing. To calculate the Cost of Capital (or discount rate) requires more detailed information about the capital structure and financing of your firm. In this ebook, we will not concern you with computing this rate. If you require the discount rate to compute capital budgeting tools in Primavera P6 then it is recommended that you consult the firm s Controller or appropriate financial manager. PRESENT AND FUTURE VALUE OF MULTIPLE CASH FLOWS Sometimes you may come across multiple cash flows that occur throughout the duration of the project. In this case, you must calculate the Present Value or Future Value of the cash flows. The cash flows are generally the same amount, but are discounted using the specified rate at different points in time. You can use two methods to calculate multiple cash flows within the same investment: (1) Add individual discounted cash flows together to find the total value, or (2) Use the PV or FV annuity formulas. First, we will demonstrate how to calculate the individual discounted cash flows to understand what multiple cash flows are: Example: How much cash would I company have if it invested $5, per year for 4 years at 6%? Create a timeline: $5(1.6) 3 $5(1.6) 2 $5(1.6) 1 Total Future Value $5,955.8 $5,618. $5,3. $5,. $21,873.8 This process works similarly if you are discounting cash flows to the Present Value. 7 P a g e

9 e C P M 1 5 C a p i t a l B u d g e t i n g PRESENT AND FUTURE VALUE ANNUITIES Annuities are specific cash flows that occur for a specified time period. Much like the example above, payments are paid or received for a predetermined amount of time, on specific dates, and for a specified rate. An example of an annuity is a bank loan payment that must be paid each month. Both the future value and present value can be calculated using annuities formulas. In these formulas, the lump sum value is not used to calculate the final Future or Present Value. Instead, the payments value that occurs at each period is used to calculate the annuities. Future Value Annuities Formula: [(1 + r) n 1 FVA = PMT r [ Where FVA = Future Value of Annuity PMT = Payment, dollar value r = interest (or discount) rate n = number of periods Present Value Annuities Formula: [ 1 (1 + r) -n PVA = PMT r [ Where PVA = Present Value of Annuity PMT = Payment, dollar value r = Interest( or discount) rate n = number of periods To show how these formulas work as a short-cut to calculating the Present Value or Future Value of an annuity payment, we will demonstrate an example of a Present Value annuity payment in both methods to calculate multiple cash flows. 8 P a g e

10 e C P M 1 5 C a p i t a l B u d g e t i n g Example: A company pays $7,5 a year to pay down a loan they borrowed from the bank 5 years ago. At 8%, how much was the initial value of the loan? 8% 1 8% 8% 8% 8% $5,14.37 $7,5/(1.8) 5 $5, $7,5/(1.8) 4 $5, $7,5/(1.8) 3 $6,43.4 $7,5/(1.8) 2 $6, $7,5/(1.8) 1 $29, Or, use the PVA formula to quickly calculate the total Present Value. PVA = $7,5 [ 1 (1 +.8) -5.8 [ = $29, You can see that the annuity formulas are faster methods of calculating the Present or Future Values of payments. These formulas are especially useful when calculating long-term payment plans (it would be very time-consuming to calculate each individual value!). USING PRESENT VALUE AND FUTURE VALUE IN CAPITAL BUDGETING Understanding the concept of discounting present value and future value lump-sums and payments is very important in capital budgeting. By discounting the dollar value of projected cash inflows and cash outflows to a specific time, you compare whether the inflows will cover the cost of the outflows. This is the essence of Net Present Value (NPV). You can also use the value of the benefits and costs at a specified period of time to evaluate the return on the investment. Comparing the dollar value of cash inflows and outflows for an investment at different points in time would be futile because it would not account for time value of money. Since money is valued more as time progresses, you would not be comparing the actual benefit of investing into a project at an earlier point in time. We discount the future cash inflows to the present cash outflows so that we may evaluate the outcome as though it had occurred all at the same time. By doing so, the capital budgeting tools will evaluate the actual benefit received of investing into a project now. 9 P a g e

11 e C P M 1 5 C a p i t a l B u d g e t i n g SECTION 2: CAPITAL BUDGETING Capital Budgeting is the process by which managers select long-term investments. In Portfolio Management, these investments could be programs, projects, initiatives, deliverables, and so on. These investments require capital input and produce a benefit to the company in the future. The purpose of using capital budgeting tools is to evaluate which investments will maximize the value for the organization. Since organizations are restricted by capital resources, executives and managers must decide which projects hold the most value for the company in the long-run. Primavera P6 utilizes capital budgeting tools to help managers compare investments and their returns to the organization. Before using Primavera to find these answers, we will look at the concepts, benefits and limitations and decision factors for each tool. You will also learn how to calculate these capital budgeting tools to help you understand how Primavera P6 derives its answers. You will be able to analyze projects and portfolios to decide which projects to undertake and which to reject to maximize the value of the firm and receive the highest return on your investments. NET PRESENT VALUE Net Present Value (NPV) measures the profitability in dollar value of investment. Since the purpose of capital budgeting is to maximize the value of the organization through selecting profitable investments or projects, Net Present Value is the primary technique used to measure investments. The Net Present Value is computed by finding the total present value of all future cash flows less the initial cost of the investment. The Net Present Value formula: NPV = CF t (1 + r) t - CF Where = Sum of CF t = Cash flow at a specific time, t r = Interest (or discount) rate t = Specific period, t CF = Initial cost at the beginning of the investment, t= In other words, the formula of Net Present Value is: Net Present Value = Sum of Present Value of Future Cash Flows Initial Cost of Investment 1 P a g e

12 e C P M 1 5 C a p i t a l B u d g e t i n g Since NPV is a measure of value and profitability, then a project should be accepted if the NPV is greater than (NPV>). The positive NPV indicates that the organization is receiving a higher return than the required rate of return set by stakeholders who are lending the capital to the firm. A positive NPV indicates an opportunity for the firm to earn future profit. If the NPV of an investment is less than, then the investment should be rejected (NPV<). If the NPV is equal to, then the investment s return is exactly equal to the required rate of return to repay the capital. Managers should decide whether the investment is worth receiving an NPV equal to while considering the potential further opportunities or further risk the company will undertake. BENEFIT AND LIMITATIONS OF NET PRESENT VALUE A benefit of using Net Present Value as a capital budgeting measure is that it takes into consideration the time value of money, the risk of the investment, and accounts for all cash flows related to the investment. NPV also measures the value of the investment that would result in benefiting the organization. Since the goal of a firm is to maximize shareholders wealth through maximizing the firm s overall equity and value, then utilizing the NPV tool will help managers select the right investments for the firm. Net Present Value does not come without limitations. Since many managers prefer to understand profitability or value as a percentage, NPV may be hard for concept for people to understand. Users of NPV must understand the concept of the time value of money by calculating the Present Value of future cash flows. Second, since we use the cost of capital of the firm that is set by stakeholders, we are assuming that all projects have the same risk and that the capital structure of the firm will not change. This is not always true. Some projects can be riskier than others and the firm may choose to change their capital structure of raising funds through debt and equity. The NPV may not be accurate portrayal of comparing all investments against one another since they are all variable in risk. Finally, NPV does not consider any opportunity costs that the firm may incur by investing in one project rather than the other. These are managerial decisions that must be made but cannot be accounted for in this calculation. EXAMPLE: NET PRESENT VALUE In this example, we will demonstrate how to calculate the Net Present Value using a time-scale and the present value calculation of each future cash flow. When you use Priamvera P6, you will not need to do these individual calculations since the software will compute NPV for you. 11 P a g e

13 e C P M 1 5 C a p i t a l B u d g e t i n g Example: Assume a company has the opportunity to invest in two mutually exclusive projects (ie., the company can only select one project). Based on the follow data, which project should the firm undertake? Assume the firm s cost of capital is 1%. Year Project A Project B - $6, - $6, 1 $15, $7,5 2 $15, $12,5 3 $15, $17,5 4 $15, $22,5 5 $15, $27,5 Project A $6, $15, $15, $15, $15, $15, Since Project A uses annual payments of $15, we can use the Present Value Annual formula. PVA = 15, [ 1 (1 +.1) -5.1 [ = $56,861.8 Now, calculate the Net Present Value Net Present Value (Project A) = $56, $6, = -$3,138.2 Project B Since Project B has different cash flows, we will calculate each present value individually $17,75.34 $27,5/(1.1 5 ) $15,367.8 $22,5/(1.1 4 ) $13,148.1 $1,33.38 $12,5/(1.1 2 ) $17,5/(1.1 3 ) $6, $7,5/(1.1 1 ) $62, P a g e

14 e C P M 1 5 C a p i t a l B u d g e t i n g Now, calculate the Net Present Value: Net Present Value (Project B) = $62, $6, = $2, In this example, the clear choice is to select Project B. Project A s NPV is less than, which indicates that the project offers a lower return rate than the required rate of return set by stakeholder. Project B has a higher NPV than Project A, and its NPV is greater than. Project B will provide future value to the company. RETURN ON INVESTMENT Return on Investment (ROI) measures the return your organization will receive from a percentage of the capital investment. ROI is calculated as the benefit received from the investment less the cost of the investment divided by the entire cost of the investment. Many people use ROI as a quick way to measure the profitability of an investment. Basic Return on Investment (ROI) formula: ROI = Gain on Investment Cost of Investment Cost of Investment Where Gain on Investment = Total Benefit of Investment Cost of Investment = Total Cost of Investment The basic formula that most managers use to calculate ROI does not account for the time value of money. This formula would over-estimate the return of the investment because the value of the money received in the future would be valued higher than the cost of the investment now. Instead, we will use a modified formula to accurately depict the return received from the investment. ROI = PV Gain on Investment PV Cost of Investment PV Cost of Investment Where, PV Gain on Investment = Total Present Value of Benefit PV Cost of Investment = Total Present Value of Cost Notice something interesting about this formula? The top part of the formula (ie, PV Gain on Investment PV Cost of Investment) is the same as the Net Present Value. Therefore, we can say that Return on Investment is equal to the NPV of an investment divided by the PV of the cost of the investment. 13 P a g e

15 e C P M 1 5 C a p i t a l B u d g e t i n g Since managers want to invest in a project that yield positive results, select investments that have a ROI greater (>). If an investment has a ROI less than (<), then reject the project. If an investment has a ROI equal to (=), then the returns received from the investment are exactly equal to the cost of the investment. Managers should use their discretion when selecting projects that have low ROI. If you evaluate two investments with positive ROI, select the project with a high ROI. Therefore, the firm will receive a higher return on the cost of the investment. BENEFITS AND LIMITATIONS OF RETURN ON INVESTMENT The benefit of using the ROI calculation is that most people find it easier to compare percentages of investments rather than the present value dollar amounts. Since the Return on Investment calculation is derived from the Net Present Value, ROI receives the same benefits and limitations from the NPV calculation. To recap, the ROI takes into account the time value of money, timing, and the risk of the investment. But, ROI also does not account for different risk levels in investments or changing capital structures in the firm. EXAMPLE: RETURN ON INVESTMENT Using the same example from above, calculate the ROI for Project A and Project B. Project A Project B ROI A = -3, , = -5.23% ROI B = 2, , = 4.47% Again, the project to select is Project B. Project A s ROI is less than ; therefore it is not yielding a positive return to the company. Project B s ROI is greater than Project A s ROI and is greater than. Project B s cash flows yields a positive return to the company above the cost of the initial investment. 14 P a g e

16 e C P M 1 5 C a p i t a l B u d g e t i n g PAYBACK PERIOD The Payback Period measures the amount of time it takes for an investment to recover the initial costs. To calculate the payback period, we can use a table as illustrated in the example below. The investment, or project, should be accepted by the organization if the Payback Period is shorter than a specified time constraint. If there is no time constraint, then select the project with the shorter Payback Period. If the investment, or project, goes beyond a specified time constraint, then reject the project. BENEFITS AND LIMITATIONS OF PAYBACK PERIOD The Payback Period is an inexpensive technique used by organizations to calculate when they will break-even on an investment. This method does not require a cost of capital, or required rate of return; therefore, it is much easier and faster to calculate. By indicting the length of the investment before costs are recovered, managers can compare the amount of risk associated with the project. If a project has a long payback period then it is most likely more risky than a project with a shorter payback period. The Payback Period has a number of flaws. Since it does not account for the cost of capital, it does not account for the time value of money. Therefore, it is not an accurate portrayal of when the investments will break-even and the organization will recoup the initial cost. The Payback Period also ignores any cash benefits that may occur after the investment has been paid back to the firm. This means that it ignores future benefits that could be more or less than another investment. Since most organizations have variety of projects, the Payback Period calculation is biased towards short-term projects that recover their costs quickly, ignoring projects with long-term benefits. Finally, the Payback Period does not concern itself with shareholder value and is not calculated on an economic basis. This does not allow the Payback Period from varying industries to be easily compared. DISCOUNTED PAYBACK PERIOD Instead of using the simple Payback Period, Primavera P6 uses a Discounted Payback Period to calculate the time it takes to recover the initial cost of the project. It does so by calculating the P6 of each cash flow in the following years. By utilizing the time value of money in the calculation, the Discounted Payback Period can portray an accurate time frame for how long it will take to recoup the cost of the investment. 15 P a g e

17 e C P M 1 5 C a p i t a l B u d g e t i n g EXAMPLE: PAYBACK PERIOD Refer to the example above. Determine the Payback Period and the Discounted Payback Period for Project A. Project A Time Cash Flow -6, 15, 15, 15, 15, 15, Discounted 13,636 12,397 11,27 1,245 9,314 Cumulative -6, 46,364 33,967 22,697 12,452 3,138 Cash Flow % of Year Payback - Year 1 = $15, / (1.1) 1 = $13, Year 2 = $15, / (1.1) 2 = $12, Year 3 = $15, / (1.1) 3 = $11, Year 4 = $15, / (1.1) 4 = $1,245.2 Year 5 = $15, / (1.1) 5 = $9, Discounting the future cash flows to the Present Value in Project A consequently created a non-existent Payback Period since they could not recoup the entire initial investment. Now let s try calculating the Discounted Payback Period for Project B. Time Cash Flow -6, 7,5 12,5 17,5 22,5 27,5 Discounted 6,818 1,331 13,148 15,368 17,75 Cumulative -6, 53,182 42,851 29,73 14,335 14,335 Cash Flow % of Year A Payback 4.84 Year 1 = 7,5 / (1.1) 1 = $6, Year 2 = 12,5 / (1.1) 2 = $1,33.58 Year 3 = 17,5 / (1.1) 3 = $13,148.1 Year 4 = 22,5 / (1.1) 4 = $15,367.8 Year 5 = 27,5 / (1.1) 5 = $17,75.34 A = 14,335/1775 =.8395 By discounting the future cash flows for Project B, we can see that the project will take 4.84 years to recoup the initial $6, investment. When using the simple Payback period, one should be cautious of the time frame indicated to recoup the initial investment since it does not discount the future cash flows by the firm s cost of capital. Primavera P6 uses the Discounted Payback Period to eliminate this 16 P a g e

18 e C P M 1 5 C a p i t a l B u d g e t i n g potential problem. But, remember that the Discounted Payback Period still not account for cash flows beyond the payback period specified which may skew a manager s perception of the project. SECTION 3: USING CAPITAL BUDGETING IN PRIMAVERA P6 Now that you have a basic understand of the Net Present Value, Return on Investment, and Payback Period, you will be able to successful use the capital budgeting tools in Primavera P6 and analyze the results. To show you how Primavera will calculate these values for you, we will use the example above in Primavera P6. We have created Project A and B with the following data: Year Project A Project B - $6, - $6, 1 $15, $7,5 2 $15, $12,5 3 $15, $17,5 4 $15, $22,5 5 $15, $27,5 We are assuming that the discount rate applied is 1% and that the cash flows are annual. We have inputted these values into Primavera to calculate the same results as we had computed manually above. 17 P a g e

19 e C P M 1 5 C a p i t a l B u d g e t i n g Project A Results In Primavera P6, the Spending Plan indicates any cash outflows during the project while the Benefit Plan indicates any cash inflows. Cash inflows and outflows can occur at any point during the project because investments are not always cut and dry. Primavera takes away the complication of calculating these capital budgeting techniques by automatically calculating the values for you. You can see that Primavera used the same values to compute the Net Present Value, Return on Investment and Payback Period that we calculated earlier. Notice that the Payback Period has been left blank. That is because the discounted benefit of the project ($56,862) will not recover the total initial cost of the project ($6,); therefore, the Payback Period does not exist. Next, look at the results for Project B. 18 P a g e

20 e C P M 1 5 C a p i t a l B u d g e t i n g Project B Results Again, Primavera P6 quickly used the values of the project s spending and benefits plan, discount rate, and period to calculate the NPV, ROI, and Payback Period. Notice this time that Primavera calculated a Payback Period. This is because the project has a larger discounted benefit plan ($62,74) than the spending plan ($6,), hence the project is able to repay the initial investment. Primavera is currently calculating the Payback Period in days. The days required to complete the project are determined by the Calendar assigned to the project. This way, Primavera can give managers a more accurate description as to when the project costs will be recouped. Once the projects in a portfolio have had their NPV, ROI, and Payback Period computed, you can compare the projects in the ROI page. The ROI displays each projects (or investments) comparative data in columns as well as the portfolio s total value in each column. From this page you can compare projects and decide which to accept or to reject. In this example, we would reject Project A. 19 P a g e

21 e C P M 1 5 C a p i t a l B u d g e t i n g If you would like a close-up view of an investment s spending and benefit plan and an overview of a project s summarized capital budgeting calculations, click on the View Chart button on the ROI page for a specific investment. We opened Project B s data to view the spending and benefit plan and the capital budgeting values. As you can see here, Primavera P6 Web Access has been designed to help you quickly calculate Net Present Value, Return on Investment, and Payback Period with ease. Primavera has can also help you analyze this data by displaying charts and diagrams to visually compare investments and portfolios against one another. Now that you understand how these values are computed manually, utilize the ROI page in Primavera P6 to evaluate and manage your portfolios and projects effectively. To learn how to enter the Spending and Benefit plan values, discount rates, and application period, practice Module 4: Viewing Portfolio Information. 2 P a g e

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