Cost benefit Analysis

This sheet should include:

• theinterest costfor each yearin your calculation.(Hint: your monthly payment isnotyour cost).
• abreak-even analysis chart.In your spreadsheet, you should indicate which year is the breakeven year by using theIF functionin Excel.Print "Breakeven year"below that cellonly.
• a professional recommendation regarding your proposal based on the cost-benefit analysis (and this should also be included in the Executive Summary)

Cost Assumptions:

The UHT initiative will be rolled out in selected cities in the first year and then to all locations in subsequent years (assuming the first year succeeds). Investment is needed for: 1) prototyping the system, 2) AI and CRM software, the big data store, a secure website, video conferencing, and the UHT app, and 3) hiring and training virtual sales representatives (of different body types). The following are the cost assumptions (detailed justification and calculations for each number are provided in the full UHT proposal). All system development is planned to be outsourced.

1. SimpleU will finance the prototype and the first year system development and first year personnel cost through a bank loan. This is a 5 year loan, with an annual interest rate of 3.5% and monthly payments are scheduled to repay the loan principal and interest.
2. System development costs include:
3. Software maintenance upgrades for the AI, CRM, website, backend, and app. In the second year, this will be $2,000,000, and this is projected to increase by 30% per year over the previous year for Years 3, 4, and 5.
4. Additional personnel costs (for virtual sales reps): first year will be $1,000,000, the second year will be $2,000,000. After that the annual increases will be: 35% for year 3 over Year 2, 30% for year 4 over year 3, and 20% for Year 5 over Year 4.
5. Marketing costs for new branding of the UHT initiative: these are estimated to be$4,500,000 for the first year. After that the annual increases will be 10% for Year 2 over Year 1, 15% for Year 3 over Year 2, 20% for Year 4 over Year 3, and 20% for Year 5 over Year 4.

Benefits Assumptions:

Based on substantial market analysis and surveys.There are two major benefits:

1. Benefits from additional sales: SimpleU's current gross sales are $400 million with a profit margin of 15%. (Note: all other costs, such as cost of goods, are included for calculating the profit margin and this is assumed to remain constant for other years.) The team estimates that the implementation of the UHT system and extensive marketing will keep the customers from leaving and increase total sales by 2% in the first year. The team projects that the total sales will increase an additional 8% over the first year in the second year, a 12% increase over Year 2 in Year 3, a 10% increase over Year 3 in Year 4, and an 8% increase over Year 4 in Year 5.
2. Benefits from inventory savings for individual stores: As all the orders can be shipped from the warehouses, the inventory for each store is estimated to decrease. The total savings due to decreased inventory is projected to be $3,000,000 in the second year and increase by 20% each year thereafter.
3. Benefits from reducing the number of stores: As more customers move to UHT, some store locations can be closed. This is expected to save $7,000,000 in each of years 3-5.

Please mention what are the fixed cost and the operational cost