Perform Cost of Entry/Value of disposition Test (NPV) of UPS: Domestic Package, Supply chain solutions and Freight services

If you are performing an analysis on an existing (already owned) SBU, the cost of entry test becomes the value of disposition test if you were to dispose of it. Project the future profits for each SBU and enter them into the line items in your net present value calculator. Select and justify a useful life for the profit stream.

Perform a net present value analysis of the projected earnings stream for the entire SBU, not just the savings between SBUs for the shared activity. In the future, after the earnings stream has ended, the SBU will still own assets. Estimate the future value of these assets and perform a NPV analysis to determine their present value. Add this value to the discounted value of the earnings stream.