1. Calculation of Present Value
Farrokh Alemi, Ph.D.

2. Present Value

3. “Show Me the Cash” Years before receiving the cash
Interest rate or opportunity cost
of investment

4. Example of Present Value
Interest rate
Years till return
If we assume a 6% interest rate, receiving $1,000 in 5 Years is worth $747 today.

5. Present Value of IT Costs
Year 1
Year 2
Year 3
Year 4
Year 5
Cost in 000
$88,167
$70,999
$47,335
$35,501
$28,399
Present value?
$83,176
$63,188
$39,743
$28,120
$21,221
Assume 6% Interest Rate or 0.06

6. Present Value of IT Costs
Year 1
Year 2
Year 3
Year 4
Year 5
Cost in 000
$88,167
$70,999
$47,335
$35,501
$28,399
Present value?
$83,176
$63,188
$39,743
$28,120
$21,221
Shows returns
in each year

7. Present Value of IT Costs
Year 1
Year 2
Year 3
Year 4
Year 5
Cost in 000
$88,167
$70,999
$47,335
$35,501
$28,399
Present value
$83,176
$63,188
$39,743
$28,120
$21,221

8. Present Value of IT Costs
Year 1
Year 2
Year 3
Year 4
Year 5
Cost in 000
$88,167
$70,999
$47,335
$35,501
$28,399
Present value
$83,176
$63,188
$39,743
$28,120
$21,221

9. Present Value of IT Costs
Year 1
Year 2
Year 3
Year 4
Year 5
Cost in 000
$88,167
$70,999
$47,335
$35,501
$28,399
Present value
$83,176
$63,188
$39,743
$28,120
$21,221

10. Present Value of IT Costs
Year 1
Year 2
Year 3
Year 4
Year 5
Cost in 000
$88,167
$70,999
$47,335
$35,501
$28,399
Present value
$83,176
$63,188
$39,743
$28,120
$21,221

11. Present Value of IT Costs
Year 1
Year 2
Year 3
Year 4
Year 5
Cost in 000
$88,167
$70,999
$47,335
$35,501
$28,399
Present value
$83,176
$63,188
$39,743
$28,120
$21,221

12. Present Value of IT Costs
Year 1
Year 2
Year 3
Year 4
Year 5
Cost in 000
$88,167
$70,999
$47,335
$35,501
$28,399
Present value
$83,176
$63,188
$39,743
$28,120
$21,221

13. Present Value of IT Costs
Year 1
Year 2
Year 3
Year 4
Year 5
Cost in 000
$88,167
$70,999
$47,335
$35,501
$28,399
Present value
$83,176
$63,188
$39,743
$28,120
$21,221

14. Present Value of IT Costs
Year 1
Year 2
Year 3
Year 4
Year 5
Cost in 000
$88,167
$70,999
$47,335
$35,501
$28,399
Present value
$83,176
$63,188
$39,743
$28,120
$21,221
Present Value of 5-year Cost of Investment
$235,450,000