In reply to: I think your kidding yourself if you don't think it's posted by Bellcon
team. Thus, it isn't a stretch to deduce it is hard to increase the top line much indepenednt of wins and losses. However, you can lower the bottom line by adding more expense:
1) $5 million more per year for coaches
2) $5 million more per year for the overall budget (nutrition staff, whatever)
3) $5 million more per year for physical plant improvements in an infinite loop
That's $15 million off the bottom line. That means you probably have to add $45 million more to the top line to be breakeven. Adding $45 million more to a team already sitting at #2 overall is not trivial.
Thus, the ROI as mentioned at the start of this thread likely is 0. The NPV EVA at (5%) would probably be zero or negative. In pure dollars and sense it may not be a slam dunk ROI to pay for the elite program.
However, as I said, that should not be the sole criteria used in the business case. I would argue -- I do run a management consulting business -- that an EVA of $0 is justification to make the move because the true mission is to be the best we possibly can be and right now we cannot be the best we can possibly be. ND has it within their financial means to spend more without damaging the University. Thus, they should do what it takes to try and be the best they can be.
If $15MM represents the entire incremental expense, then breakeven only requires incremental $15MM in revenue. Perhaps not possible, which would be the issue, but why the $45MM incremental revenue?
...by $15 million leaves you $15 million to pay new expenses over and above the expenses that already vary with revenues. In other words, you're assuming that $15 million gross is $15 million net. Most likely, $15 million in additional gross revenues from ticket sales, merchandise sales, and food & beverage sales would be whittled down significantly by costs of goods sold, additional wages, and additional operating overheads related to the revenue generation. In this scenario, you also add a new coaching staff salary increment to the expense load. Maybe $45 million is too high, but you'll need more than $15 million in new gross revenues.
profit margins on that incremental revenue. I have no idea what our margins are, but for the sake of argument our cost of goods sold is at least 50%, so we'd need to raise revenue by 30 million to recover the 15 million off the bottom line.
To be clear, I am not saying I don't think we should spend the money. I am just saying a pure financial argument would likely fail if someone tried to make one. It arguably would show breakeven or even a loss in terms of absolute dollars.