so assessing cost now that is a tricky business uh many tools many methods around the assessment of costs and we will look at a few of them net profit payback period return of investment and net present value so looking at net profit this is pretty easy this is the bottom line this is whatever you make um during the entire life cycle of the project minus all the money and all the resources you've spent uh during that life cycle that is the bottom line and that is the net profit payback period that's a slightly different thing um but again you invest something and then you hope to get something in return which would be the income and so where the investments because the further the project and program is going you know the less investments you need to put into you always need to invest more at the beginning and obviously the income is going to be zero at the beginning but then that hopefully is going to increase and it's the break even point you're after that's the payback period so the closer the break-even point is to the start of the project or the program the better the longer it takes for you to break even the worse it is but that's the payback period it's when you you know cross the line and you start making money um return of investment roy is a very much used term and it is the total gain of an investment minus the total cost of the investment so in the example there if you buy a book for 100 pounds and then you offer to rent it to people for 10 pounds per week you do whatever you bring in the total gain after a certain amount of weeks for the rental thing minus the hundred pounds that the book would cost then you have the return of investment how much money will you make after you deduct the total cost of your investment net present value npv is the the most complex thing that we're gonna talk about you don't need to to be an expert in all of this you need to know about it and roughly how it works so it's based on the present value how much a thing or a resource or a project or a program or an investment is worth now at present so for example a thousand norwegian kroner today is going to be more worth than a thousand kroner in a year um so let's say if you invest a thousand kroner and you get 10 interest um it's going to be worth 1000 times 1.1 equals one thousand one hundred which means if you invest one thousand chrono today you get 10 interest in one year that's going to be worth 1 100. um so let's remove that again there is something mysteriously wrong with my mouse it disappears um but anyway here we go so um 1000 again another kind of example 1000 kroner with a 10 interest per year will in three years become 1331 because now you have three times this right so you take a thousand times 1.1 and you take the result of that times another 1.1 and the result of that times another 1.1 and the result of that is the net present value of 1 331 and you can also do it backwards how much would 1 331 in three years be worth right now and it's the same kind of thing you two you do the uh you do the math backwards so instead of taking whatever value you have at present thousand kroner times 1.1 you divide the future number so 1 331 divided by 1.1 divided by 1.1 divided by 1.1 and you should end up with 1 000. and that gives you a formula right present value equals future value divided by 1 plus r raised to the power of n where r is the interest and n is the number of years so another example five thousand norwegian kroner how much would five thousand kroner in three years be worth now given you a vest invest an amount and you get 15 interest so you put it in to the formula right where you do the value 5000 divided by 1 plus 0.15 so that would be the interest right rise to the power of 3 which would be the number of years and that gives us 3285.50 which means that 5000 kroner three years from now is the same as 3290 today provided you will get a 15 interest on that uh so another example you invest 3 000 now and somebody says well you'll get 500 kroner per year for the next three years and then i'll pay you 2500 the fourth year and then you're going to have to to decide whether this is a good deal or not provided 10 interest so the value now is three thousand minus three thousand because you invest so the present value is minus three thousand you give away three thousand chronic uh year one you get five hundred divided by one 1.1 which means the first year you're going to get 455 kromer back the second year that you're going to get 500 divided by 1.1 right to the power of 2 which is 430 kroner so you see the value of that which is value at 500 now is less valued some years from now the third year you also get 500 but now you divide it by 1.1 a rise to the power of 3 which is 376. so you add that up and then you add 2 000 uh sorry you also have to calculate the the last bit of money of course 2 500 divided by 1.1 rise to the power of 4 because the payment is done the fourth year so it's only only going to be worth 1708. so you add those sums together and you figure out that if you invest three thousand kroner now with that payback scheme you will end up losing 48 crore so not a good deal