BIZOMAT Tools · Money
Investment Hurdle Check
Does the investment clear a simple commercial hurdle?
Tests an investment against the payback and return thresholds your organisation sets.
Open the calculatorRuns in your browser. No account needed.
How this tool works
Inputs, units and where to find them
| Input | Unit | Typical source |
|---|---|---|
| Initial investment | $ | Total installed cost from quotations |
| Annual net benefit | $ | Annual benefit minus ongoing costs |
| Maximum acceptable payback | years | Payback limit set by your capital approval policy |
| Minimum acceptable ROI | % | Minimum annual return set by your capital approval policy |
What each input means
Open an input to see what it is, its units, the worked example and the common mistakes, with a small diagram.
What this means: Initial investment
- What it is
- The total installed cost of the investment from quotations: purchase, delivery, installation and commissioning.
- Units and format
- Enter a number in $: an amount of money; use one currency for every money input. The form accepts $1 or more.
- Example
- The form opens with $50000 as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- A larger investment lengthens payback and lowers ROI.
- Get it right
- Include installation and commissioning, not only the purchase price.
What this means: Annual net benefit
- What it is
- The yearly benefit after ongoing costs have been taken off: savings or extra contribution minus maintenance, licences and running costs.
- Units and format
- Enter a number in $: an amount of money; use one currency for every money input. The form accepts $0 or more.
- Example
- The form opens with $20000 as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- A higher net benefit shortens payback and raises ROI.
- Get it right
- This is a net figure: subtract ongoing costs before entering it.
What this means: Maximum acceptable payback
- What it is
- The longest payback your capital approval policy accepts, in years: the investment must earn back its cost within this time.
- Units and format
- Enter a number in years: years. The form accepts 0.1 years or more.
- Example
- The form opens with 3 years as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- Only moves the pass or fail line for payback; the calculated payback does not change.
- Get it right
- Use the limit in your organisation’s capital policy rather than a personal preference.
What this means: Minimum acceptable ROI
- What it is
- The lowest simple annual return your capital approval policy accepts, as a percentage of the investment.
- Units and format
- Enter a number in %: percent: the number is read as a percentage, so type 8 for 8 %. The form accepts 0% or more.
- Example
- The form opens with 20% as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- Only moves the pass or fail line for ROI; the calculated ROI does not change.
- Get it right
- Type the percentage itself (20 for 20 %).
Method and formulas
- Payback = investment ÷ annual net benefit
- Simple annual ROI = annual net ÷ investment
- Passes only if payback ≤ limit and ROI ≥ hurdle
Limitations
- Simple (undiscounted) measures
- Thresholds are management choices
Typical uses
- Capital expenditure approval
- Quick screening of improvement ideas
Who it is for
- Managers preparing capital requests
- Approvers and finance
What you get
- PASSES HURDLES or BELOW HURDLE
- Payback and return against each threshold
Interpreting the result
- A FAIL on either hurdle means the case needs more benefit, less cost or an exception
- Use the ROI and NPV tool for a discounted view
BIZOMAT tools are screening and decision-support utilities. Verify important financial, engineering, safety, legal or operational decisions using appropriate professional standards and your organisation’s approved data.