Activity $3($Capital Budgeting Methods$)$: International Sports Systems $($ISS$)$

Note: The solution to the case $($all the calculations and answers in this excel file$)$ should be uploaded to the campus before the midnight of the $14$th of January of $2024.$

The company International Sports Systems was considering the possibility of acquiring a new model of ERP to replace the old one that the company had in its

headquarters. The new ERPS on the market were technologically more efficient and reduced the number of workers needed to operate them. Also, the maintenance costs

were quite lower than the old model that had been used for already $10$ years.

Two ERP suppliers had approached the company and had offered two different models that had a price of $720\mathrm{.}000$ euros and an expected life of $10$ years. The estimation

of the increase in net income, due to the reduction of operating expenses, obtained during those $10$ years for each model are shown below.

If the CFO of ISS had estimated that in order to accept this new investment project, the board of directors would be looking at a cost of capital of a $16\%,$ could you answer

the following questions and help him make a decision?

Question $1$: Based on the Cash Flow ROI, what would you suggest the CFO? $(1$ point$)-2$

Question $2$: Which is the limitation of the CFROI as a capital budgeting method? $(1$ point$)+$t ignows jime ralue of whey

Question $3$: Based on the Pay$-$back CFROI, when would the investment be recovered in each of the new models? $(1$ point$)$

Question $4$: Using the capital budgeting method you consider the most appropriate, what would you recommend the company? $(2$ points$)-$

Question $5$: Which is the rate of return of each ERP? $(2$ points$)-$ I RF

Question $6$: Which if the rate of return of the investor for each ERP? $(2$ points$)-$ MIRR

Question $7$: Which is the value created by each ERP? $(1$ points$)$