Question
For the Reduced Expenses due to EHRs benefits category, use a growth rate of 6%. For the Reduction in Patient Pharmacy Calls benefits category, use
For the Reduced Expenses due to EHRs benefits category, use a growth rate of 6%. For the Reduction in Patient Pharmacy Calls benefits category, use the same benefit amount of $300,000 for each year. For the Reduced Errors benefits category, use the same benefit amount of $450,000 for each year.
Increase the development costs (expenses) for the first year by four times (compared to the above spreadsheet). Increase the and operational costs (expenses) for the first year by three times (compared to the above spreadsheet). Leave the categories the same. Use the same growth rate (as used in the original spreadsheet) for subsequent years.
Compute the ROI and NPV for the EHR implementation project.
| COST BENEFIT ANALYSIS (ROI and NPV) FOR A HYPOTHETICAL INTERNET SALES PROJECT | |||||||||||||||||
| YEAR | |||||||||||||||||
| ITEM | 2016 ($) | 2017 ($) | 2018 ($) | 2019($) | 2020 ($) | Total ($) | |||||||||||
| BENEFITS | |||||||||||||||||
| Reduce Expenses due to EHRs | 1,500,000 | 1,590,000 | 1,685,400 | 1,786,524 | 1,893,715 | ||||||||||||
| Reduction in Patient Pharmacy Calls | 300,000 | 70,000 | 70,000 | 70,000 | 70,000 | ||||||||||||
| Reduced Errors | 450,000 | 68,000 | 68,000 | 68,000 | 68,000 | ||||||||||||
| Total Benefits | 2,250,000 | 1,728,000 | 1,823,400 | 1,924,524 | 2,031,715 | ||||||||||||
| Present Value (PV) of Benefits | 2,184,466 | 1,628,806 | 1,668,669 | 1,709,915 | 1,752,576 | 8,944,431 | |||||||||||
| Cumulative PV of All Benefits | 2,184,466 | 3,813,272 | 5,481,941 | 7,191,856 | 8,944,431 | ||||||||||||
| DEVELOPMENT COSTS | |||||||||||||||||
| 2 servers @ $125,000 | 250,000 | ||||||||||||||||
| Printers/Networking Gear | 100,000 | ||||||||||||||||
| Software Licenses | 34,825 | ||||||||||||||||
| Server Software | 10,945 | ||||||||||||||||
| Development Labor | 1,236,525 | ||||||||||||||||
| Total Development Costs | 1,632,295 | 0 | 0 | 0 | 0 | ||||||||||||
| OPERATIONAL COSTS | |||||||||||||||||
| Hardware | 54,000 | 81,261 | 81,261 | 81,261 | 81,261 | ||||||||||||
| Software | 20,000 | 20,000 | 20,000 | 20,000 | 20,000 | ||||||||||||
| Operational Labor | 111,788 | 116,260 | 120,910 | 125,746 | 130,776 | ||||||||||||
| TOTAL OPERATIONAL COSTS | 185,788 | 217,521 | 222,171 | 227,007 | 232,037 | ||||||||||||
| TOTAL COSTS | 1,818,083 | 217,521 | 222,171 | 227,007 | 232,037 | ||||||||||||
| Present Value (PV) of Costs | 1,765,129 | 205,034 | 203,318 | 201,693 | 200,157 | 2,575,331 | |||||||||||
| Cumulative PV of All Costs | 1,765,129 | 1,970,163 | 2,173,481 | 2,375,174 | 2,575,331 | ||||||||||||
| TOTAL BENEFITS - TOTAL COSTS | 431,917 | 1,510,479 | 1,601,229 | 1,697,517 | 1,799,678 | ||||||||||||
| Yearly NPV | 419,337 | 1,423,772 | 1,465,351 | 1,508,222 | 1,552,418 | 6,369,100 | |||||||||||
| Cumulative NPV | 419,337 | 1,843,109 | 3,308,460 | 4,816,682 | 6,369,100 | ||||||||||||
| ROI | 247.31% | ||||||||||||||||
| NPV (Net Present value) | |||||||||||||||||
| Break-even Point | 3.63 years | ||||||||||||||||
| Intangible Benefits | Improved Customer Satisfaction | ||||||||||||||||
| This service is currently offered by competitors | |||||||||||||||||
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Personal Finance Turning Money Into Wealth
Authors: Arthur Keown
8th Edition
0134730364, 978-0134730363
