Figure 2-5

Perform a financial analysis for a project using the format provided in Figure 2-5. Assume the projected costs and benefits for this project are spread over four years as follows: Estimated costs are $100,000 in Year 1 and $25,000 each year in Years 2, 3, and 4. Estimated benefits are $0 in Year 1 and $80,000 each year in Years 2, 3, and 4. Use an 8 percent discount rate. Create a spreadsheet (or use the business case financials template provided on the companion Web site) to calculate and clearly display the NPV, ROI, and year in which payback occurs. In addition, explain whether you would recommend investing in this project based on your financial analysis

Discount rate 8% Assume the project is completed in Year 0 Year 0 2 3 Total Costs Discount factor Discounted costs 40,000 40,000 40,000 40,000 10.93 0.86 0.79 40,000 37.200 34,400 31,600 243,200 Benefits Discount factor Discounted benefits 0 200,000 200,000 200,000 0.93 0.B6 0.79 0 186,000 172,000 158,000 516,000 Discounted benefits - costs (140,000) 148,800 137,600 126,400 272800 NPV Discounted benefits . costs |(140,000) 148,800| 137,500| 126,400| 272,800 NPV Curnulative benefits-costs (140,000) 8800 146,400 272,800 ROI 112%, Payback in Year 1