General description of Group Assignment A large health care company with 10,000 full time staff has initiated two potential software projects in order to enhance the cost/benefit of the company and also improve the development and delivery of its health care products and services. The detailed descriptions of the two projects are provided below: 1. Health Coverage Costs Business Model: Develop an application to track employee health care expenses and company health care costs. Health care premiums continue to increase, and the company has changed insurance carriers several times in the past ten years. This application should allow business modeling of various scenarios as well as tracking and analyzing current and past employee health care expenses and company health care costs. This application must be secure and run on the current intranet so several managers and analysts could access it and download selective data for further analysis. The new application must also import data from the current systems that track employee expenses submitted to the company and the company's costs to the insurance provider. You believe that having this data will help you revise policies concerning employee contributions to health care premiums and help you negotiate for lower premiums with insurance companies. You estimate that this application would save your company about $40 /employee/year for full-time employees over the next four years and cost about $100,000 to develop. It takes eight months to be completed and 25% of the development costs would be considered for maintenance cost each year after the completion of the project. 2. Web-Enhanced Communications System: Develop a Web-based application to improve development and delivery of products and services. There are currently several incompatible systems related to the development and delivery of products and services to customers. This application would allow customers and suppliers to provide suggestions, enter orders, view the status and history of orders, and use electronic commerce capabilities to purchase and sell their products. You estimate that this system would save your company about $2 million each year for three years after implementation. You estimate it will take one year and \$3 million to develop and require 20 percent of development costs each year to maintain. Question For both projects described above, you are required to perform financial analysis which must result in a clear and step-to-step calculation of Net Present Value (NPV) and Return on Investment (ROI). Use a nine percent discount rate, and round the discount factors to two decimal places. The results should be presented in tabular Format. General description of Group Assignment A large health care company with 10,000 full time staff has initiated two potential software projects in order to enhance the cost/benefit of the company and also improve the development and delivery of its health care products and services. The detailed descriptions of the two projects are provided below: 1. Health Coverage Costs Business Model: Develop an application to track employee health care expenses and company health care costs. Health care premiums continue to increase, and the company has changed insurance carriers several times in the past ten years. This application should allow business modeling of various scenarios as well as tracking and analyzing current and past employee health care expenses and company health care costs. This application must be secure and run on the current intranet so several managers and analysts could access it and download selective data for further analysis. The new application must also import data from the current systems that track employee expenses submitted to the company and the company's costs to the insurance provider. You believe that having this data will help you revise policies concerning employee contributions to health care premiums and help you negotiate for lower premiums with insurance companies. You estimate that this application would save your company about $40 /employee/year for full-time employees over the next four years and cost about $100,000 to develop. It takes eight months to be completed and 25% of the development costs would be considered for maintenance cost each year after the completion of the project. 2. Web-Enhanced Communications System: Develop a Web-based application to improve development and delivery of products and services. There are currently several incompatible systems related to the development and delivery of products and services to customers. This application would allow customers and suppliers to provide suggestions, enter orders, view the status and history of orders, and use electronic commerce capabilities to purchase and sell their products. You estimate that this system would save your company about $2 million each year for three years after implementation. You estimate it will take one year and \$3 million to develop and require 20 percent of development costs each year to maintain. Question For both projects described above, you are required to perform financial analysis which must result in a clear and step-to-step calculation of Net Present Value (NPV) and Return on Investment (ROI). Use a nine percent discount rate, and round the discount factors to two decimal places. The results should be presented in tabular Format
