Payback and Return on Investment Calculations questions for the CSP
CSP Domain 2: Program Management (2.11 Budgeting, finance and economic analysis (return on investment, cost/benefit analysis)). 3 free questions below. Every answer quotes and links the source of its formula.
Question 1
A hospital laundry plans to spend $83,000 on lift-assist carts and redesigned sorting tables to reduce back and shoulder injuries. The project is expected to save $27,000 a year in injury claims and missed work time. The facility manager calculates simple return on investment (ROI) over 5 years as (total savings - investment) / investment x 100, with no discounting. What is the 5-year ROI?
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Answer: D. 62.7%
Total savings = 5 x $27,000 = $135,000. ROI = ($135,000 - $83,000) / $83,000 x 100 = 62.7%. Leaving out the investment cost overstates the return, and dividing by total savings uses the wrong base.
On the job
A safety coordinator at a food packaging plant is asked to justify a $60,000 proposal for conveyor height adjustments and lifting aids. She estimates yearly savings from fewer strain injuries, multiplies by five years, and subtracts the investment from that total. She then divides the net gain by the investment and multiplies by 100 to get a simple ROI, with no discounting, which management compares against other capital requests.
Study aid, not site-specific safety advice. The official rule controls.
Answer D comes from
NIST Handbook 135 (2025), Life Cycle Costing Manual for the Federal Energy Management Program, Sec. 6.4(opens nvlpubs.nist.gov in a new tab)“Both SPB and DPB measure the time required to recover initial investment costs. ... SPB, which is more frequently used, does not use discounted cash flows in the payback calculation.”
Question 2
A commercial bakery spends $39,000 on guarding for its dough-sheeting line and expects it to cut injury-related costs by $7,500 a year. Simple payback is the investment divided by the annual savings, with no discounting. What is the simple payback period?
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Answer: B. 5.2 years
Simple payback = $39,000 / $7,500 per year = 5.2 years. Dividing the annual savings by the investment inverts the ratio, and subtracting one year of savings from the bakery's guarding cost first understates the time to recover the cost.
Answer B comes from
NIST Handbook 135 (2025), Life Cycle Costing Manual for the Federal Energy Management Program, Sec. 6.4(opens nvlpubs.nist.gov in a new tab)“Both SPB and DPB measure the time required to recover initial investment costs. ... SPB, which is more frequently used, does not use discounted cash flows in the payback calculation.”
Question 3
A plant spends $32,000 on machine guarding and expects it to cut injury-related costs by $15,000 a year. Simple payback is the investment divided by the annual savings, with no discounting. What is the simple payback period?
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Answer: A. 2.1 years
Simple payback = $32,000 / $15,000 per year = 2.1 years. Dividing savings by the investment inverts the ratio, and subtracting one year of savings first understates the time to recover the cost.
On the job
A plant engineer at a metal stamping facility proposes light curtains for a press line. The EHS manager divides the installed cost by the expected annual reduction in injury-related costs to get simple payback in years, with no discounting. That figure is compared against the company's payback threshold, which decides whether the purchase goes into this year's capital budget.
Study aid, not site-specific safety advice. The official rule controls.
Answer A comes from
NIST Handbook 135 (2025), Life Cycle Costing Manual for the Federal Energy Management Program, Sec. 6.4(opens nvlpubs.nist.gov in a new tab)“Both SPB and DPB measure the time required to recover initial investment costs. ... SPB, which is more frequently used, does not use discounted cash flows in the payback calculation.”