Group 1 Project HRTS

Your organization is a For-Profit Service company.HR is responsible for conducting orientation and knowledge training for a large call center in your company.This year your company is forecasting that you will need to train 75 new customer service representatives.Traditionally this education takes four (4) weeks.However, you have identified a new Artificial Intelligent and Rules Based training system that has been documented to reduce that training time to three (3) weeks, as compared to comparable companies.Your teams job is to provide the cost justification needed to financially support the acquisition of this new training system.From this information you will develop an Executive Summary, Excel Financial Spreadsheet and a brief PowerPoint presentation.Below are the facts of the situation.

The cost of the new HR Training System (HRTS) is $200,000

Implementation and set up costs will be $20,000

Yearly maintenance costs or licensing cost will be $10,000

The yearly salary for a new customer service representative is $30,000

Yearly benefits for a new customer service representative (CSR) is 30% of their annual salary or $9,000 per year

Attrition rate in the call center is running 18% per year.The new HRTS is forecasted to cut attrition of new CSRs by 5%

75 new CSRs will be trained this year and they work 48 weeks per year (Paid for 52 weeks), 5 days per week

Documented CSR errors are costing $35 per error and the new HRTS based on like call centers is forecasted to show a reduction of one (1) error per every five-day work week

The new HRTS will reduce the training time from four (4) weeks to three (3) weeks or $750 reduction in training costs per CSR ($39,000 / 52 weeks = $750 per peek)

Assume a seven (7) year straight line depreciation on Initial and setup costs

Assume that the following cost of capital assumptions:

1.Long Term Debt is weighted at 40% and costs 8%

2.Preferred Stock is weighted at 10% and cost 15%

3.Common Stock is weighted at 50% and costs 20%

Questions:

1.What is the initial cost of the new system plus setup costs, year zero not one year later

2.What is the annual depreciation in dollars for the new system, using straight line depreciation

3.What is the new operating expense per year

4.What is the Pretax Income after subtracting the yearly operating expenses and yearly depreciation from the sum of the expense reductions or benefits gained

5.What is 30% of the Pretax Income

6.What is the Net Income after subtracting the 30% taxes from the Pretax Income

7.Adding back the annual depreciation what is the Annual Cash Flow

8.What is the WACC

9.What is the Required Rate of Return, assume the WACC is the Required Return

10.What is the NPV

11.What is the IRR

12.What is the project breakeven in years

13.Would you approve or decline the HRIS project from as financial perspective and why?

14.Document cell calculations when a cell number is calculated