Option D Option H Options A and E Option G Option B
Low ZIP+4 Usage
Option C Options D and E Option H Option G Option B Option A
Thus, at high or median ZIP+4 usage, options D and H have the highest ROIs. And at low ZIP+4 usage, options C, D, E, and H have the highest ROIs.
Net present values. Use of ROIs for decisionmaking has a serious limitation. When more than one option clears the hurdle rate (that is, has more than the minimum required ROI, in this case 15 percent), the ROI itself gives no indication of the cash flow differences of the various options as a basis for comparing the options. An alternative to ROI frequently used in capital investment decisionmaking is net present value (NPV). NPV discounts the cash flows of each option at the hurdle or threshold rate, in this study 15 percent.
Estimated NPVs for all options under all conditions (except option F, cancel, which has a negligible NPV of $232,199) are shown in figure 11. The relative ranking of the options based on NPV is the same as the ranking based on ROI, except for option C. However, there is a significant difference in the absolute rankings when using NPV.