Return On Investment is calculated for both Undiscounted and Discounted Cash Flows. Discounted Cash Flow incorporates the time value of money; the idea that a dollar today is worth more than a dollar tomorrow. So, when calculating a future value, that value can be discounted to know its worth in today's dollars.The discounted values are calculated using the settings for the scenario. All investments that are on the case are included in this calculation; there is no option (like in PHDwin Version 2.9) to exclude certain investments from this calculation.

•Cash Flow =  Revenue - State/Local Taxes - Operating Expenses - Investments - Net Profit Interest Expense

oFor a more detailed explanation of how non-discounted cash flow is calculated, see Basic Economic Concepts and Calculations.

•Net Investments = sum of net investments over the life of the case.

Internal Rate of Return (IRR) is defined as the discount rate at which the Net Present Value (NPV) equals zero. The discounted value is calculated using the Discounting Settings (Method, Periods, and Cash Accrual Timing) set up in the Scenario Settings. If the cash fluctuates from positive to negative to positive, there could be multiple solutions for the IRR. PHDwin reports the first, positive value closest to zero.

The Payout Date in PHDwin is the date at which the Non-discounted Cumulative Cash Flow for a case goes from negative to positive. The cash flow will begin accumulating on the same date as the first investment. Any revenues prior to the first investment will be ignored. If a case encounters a second investment before reaching a positive cumulative cash flow, it will be deducted from the cash flow, and therefore, takes the case longer to reach payout. Future investments that occur after the first payout date will not be included. This payout date definition is specific to economic indicator payout. It is different from payout reversion. Both dates can be different. For information on payout reversion, see Payout Reversion under Ownership.

The Cumulative Cash Flow to determine the Eco indicator Payout Date = Revenue - State/Local Taxes - Operating Expenses - Net Profits Interest Expense - Investments

Payout on Reports

Economic indicator payout is displayed on reports as number of Years from report date.