Compare with annual return on other types of investments

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Reference no: EM131902359

For the Sears training program information is provided for the following training costs:

Direct Costs:

Instructor = $10,000

Distance Learning (satellite space rental) = $5000

Materials = $5000

Compensation for Trainees

Trainees Salaries and Benefits= $1500

Total Training Costs = $10,000 + $5000 + $5000 + $1500 = $21,500

Benefits of the program are determined by the outcomes and the value the company received from the training program. In this case, sales of tools and merchandise is the outcome. As a result of the training program, sales of tools and merchandise on average increased $1500 per store each week. Ten stores participated in the program so this means that the benefit of the program is:

10 stores x $1500 per store x 52 weeks per year = $780,000

To compute ROI:

ROI = Return/Investment = Benefits-Costs/Costs = 780000-21500/21500 = 758,500/21,500 = 35.28

This means that every dollar invested in the training program returned approximately $35 in benefits.

The company is gaining a benefit of $35.28 for every $1 invested in the training. Another way of looking at this is that the annual return on investment for the training is 3,528%. How does that compare with the annual return on other types of investments? Should the company be happy with the result?

Reference no: EM131902359

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