1. Excel Quesiton Consider a hypothetical situation where the U.S. Department of Commerce (DOC) has a 3-year need for a specific software program. The DOC must choose between A) purchasing a software package and B) developing the software on its own.

If the agency develops the software on its own, it must purchase equipment totaling $8,900 in Year 0. Software development costs accruing at end of Year 1 through end of Year 3 are expected to be $31,500, $38,000 and $43,500, respectively. The agency will receive benefits from the software in Years 1 through 3 in the amounts of $28,500, $30,000 and $49,000, respectively. The agency plans to discontinue using the software, but will sell the software and the equipment to another party at the end of Year 3 for an estimated $72,000. All of these dollar amounts are in today's terms and will need to be discounted accordingly.

Use excel todiagram the costs and benefits. Calculate net benefits, present values of the components, and NPV of the development scenario. Assume a discount rate of 7.0%.

2. The NPV of the software-purchasing scenario (Option 1) is $83,500. Can you tell whether the DOC should purchase the software or develop it in-house?

The NPV of the software-purchasing scenario (Option 1) is $83,500. Can you tell whether the DOC should purchase the software or develop it in-house? A. The DOC should purchase the software because the NPV of the purchasing option is higher than the DOC's selling price of the software they developed (after Year 3). B. The DOC should purchase the software because that option has the highest NPV. C. The DOC should develop the software because total benefit under the development option is greater than the NPV of the purchasing option. D. The DOC should develop the software because it has a greater NPV than the purchasing option. E. There's insufficient information; the cost of the software purchase isn't given. F. There's insufficient information; the Total Net Benefits of the software purchase isn't given