Hi I want to rationally assess a project. For a given process, i want to impleme

Question

Hi I want to rationally assess a project. For a given process, i want to implement a machine that will cost, 17,208 usd, and will only give a 960 usd saving in man hours every year. How do i use the project management criteria, like financial kpi´s to determine its feasibility. The problem is i don´t know which interest rate to use, because i don´t have any way to benchmark it. The only thing i can think about is the 5 percent of ROI, and that use it as an interest rate for other parameters, but i don´t really know which parameters can i use to analyze this project.

Explanation / Answer

You can use the t-bill rate of your country for the no.of years for minimum interest rate.

You need to asses the life span of machine for the calculation.

Payback for this product = Machine cost/cost saved = 17280/960 = 17.9 years

you can calculate the NPV & IRR to know the Financial feasibility.based on the t bill rate.

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