Your customer is considering purchasing and installing the very sophisticated software which your company makes which analyzes and eliminates plant expenses related to shrink due to defective parts in your operation. The software takes roughly one year to implement (during which you will not benefit from reduced shrink), but once employees are trained and using the software, experience with other customers indicates that this shrink will be completely eliminated. The annual cost of shrink in this operation is $500,000 per year. The cost of your software is $650,000, plus training costs of $50,000 in the first year. What would be the ROI for the investment over the three year period?
Hint: Keep in mind that the three-year return will be only $1,000,000 (since no shrink is avoided in the first year)