How to calculate return on investment (ROI) for automation projects?

How to calculate return on investment (ROI) for automation projects?

Usually we automate the applications to get the benefits like cost saving, faster regression testing, overnight execution, accurate testing etc.

But automating the application also involves some upfront cost involved in it. We need to buy the automation tool like QTP, we need to train people on the tool then design the automation framework.

To measure the benefit of the automation projects, we need to calculate the return on the investments. We measure what all benefits we have got after automation of the project.

Effort Saved = Manual Efforts Required for Execution  - Efforts required for automated Execution.

Once we calculate effort saved for the entire testing cycle of the project, we can find ROI by below formula.

ROI = Total Effort Saved for all regression cycles - (A+B+C+D)

where

A = Total effort required for designing automation framework
B = Effort required for the maintenance of the automation scripts
C = Effort required for the automation of testing 

D = Licensing Cost of the tool