Engineers and Business- ROI

Return on Investment- ROI
An idea needs to satisfy many different criteria in order to be successful. ROI is one criterion or metric that generally must be considered. ROI is the annual rate of return that results from an investment, expressed as a percentage. For example, if you invest $1,000 in a project that results in an annual saving of $50, then the ROI is $50/1,000 or 5%.

There are always many different alternative solutions to a problem. For each, we need to estimate the projected ROI. "Back of the envelope" order of magnitude estimates are often good enough. Start by making some assumptions. You can always refine your analysis, before making a final decision.

Example from class-
Students proposed a design for a means to capture and recyle water.
Questions:
* How many liters of water will be saved in one year?
* What is the value/ cost per liter of water?
* What is the total value/ cost of the water saved?
* How much will it cost to install the new system?
ROI= $Saved/$Total cost

In a situation where water is inexpensive this idea will probably be hard to justify economically. But if water is scare (like in a space ship) recycling certainly makes economic sense.

Strategy for Improving ROI-
* Look beyond water. Find a situation where the value of what is being "wasted" is high relative to the cost of the system required to do the recovery.
* Design a system that is far less expensive
* Include cost to the environment and to health and include these costs in your calculations.