2.11 First-year rate of return
- 2.1 Overview
- 2.2 Social cost benefit analysis and financial analysis
- 2.3 Benefits
- 2.4 External impacts
- 2.5 Costs
- 2.6 Present value and discounting
- 2.7 Time frame
- 2.8 Do minimum and benefit and cost differentials
- 2.9 Benefit cost ratios
- 2.10 Incremental cost benefit analysis
- 2.11 First-year rate of return
- 2.12 Uncertainty and risk
- 2.13 Alternatives and options
- 2.14 Packages
- 2.15 Transport models
- 2.16 Other inputs to funding allocation process
- 2.17 References
2.11 First-year rate of return
Introduction
First-year rate of return (FYRR) is used to indicate the best start date for projects. The correct theoretical basis for determining the optimal start time would be to calculate the incremental BCR of starting a project in year one compared to deferring the project to year two or a later year. However, this is a relatively complex calculation. For most projects, FYRR provides an equivalent basis for determining the best start date. The Programme and funding manual provides further guidance on the use of FYRR for project assessment.
First year rate of return
For all projects, the FYRR shall be calculated for the preferred option.
FYRR, expressed as a percentage, is defined as the project benefits in the first full year following completion of construction divided by the project costs over the analysis period:
