Fitness First, owns and operates fitness centers in 15 Midwestern cities. The centers have done well, and the company is planning an international expansion by opening a new "supercenter" in the Vancouver area. Fitness First's president, Cathy Truman, hired an IT consultant, Susan Park, to help develop an information system for the new facility. During the project, Susan will work closely with Gray Lewis, who will manage the new operation. Susan is working with Gary to study several software acquisition options for their new software system. First please review Chapter 7 of your systems analysis textbook and the material on financial analysis tools (ToolKit Part C). Susan and Gary are considering two commercial software packages and an in-house modification to Exercise Ledger option. They prepared the following summary. Option Software Software package Solutions, Four-year useful life Inc. Costs $8,000 to purchase $1,500 to install and configure $2,500 to load existing data $1,000 additional hardware neededIncreased sales, improved $2,000 annual support fee after Benefits $9,000/yr through positive customer response. Cannot predict other specific savings. Description Less flexible than in-house Some customizing needed customer care, and better first year free Software package Five-year useful life $7,000 to purchase $2,500 to install and configure $2,000 to load existing data 4,000 additional hardware needed Same as above Solution Less flexible than in-house Corp. system Moderate customizing needed $1,200 annual support fee in all Runs slower than other options In-house systenm Six-year useful life, can use Exercise Ledger software as a $1,000 to load existing data starting place and hardware. Existing staff can handle support Easiest to update and maintain five years $15,000 to develop, install, and Develop system in- Same as above configure Study the summary carefully and prepare spreadsheet templates, or navigate to the spreadsheets I have attached in Blackboard.You should assume that all three options require a year period of time for acquisition or development, installation, configuration, and data loading. This period is called Year0. Actual operation begins in Year 1, Use an 8% discount factor Now complete these tasks: A. Perform a Payback Analysis, calculate ROl and perform the NPV analysis for the Software Solutions package. B. Perform a Payback Analysis, calculate ROl and perform the NPV analysis for the Perfect Fit Solution C. Perform a Payback Analysis, calculate ROl and perform the NPV analysis for the in-house development option
