Question
Hello, can you help with this question, please use the excel file template as the solution, thanks Economic Benefit Analysis Objective: This project provides you
Hello, can you help with this question, please use the excel file template as the solution, thanks
Economic Benefit Analysis
Objective: This project provides you with an opportunity to use spreadsheet software to use the NPV technique to analyze the return on an investment for a computer-aided design (CAD) system.
Case Background:
My company would like to invest in a new CAD system that requires purchasing hardware, software, and networking technology, as well as expenditures for installation, training, and support. Management has provided your team some tables showing each cost component for the new system as well as annual maintenance costs over a five-year period. Using the data provided in these tables, create a worksheet that calculates the costs and benefits of the investment over a five-year period. Use the worksheet to calculate the following
- NPV of all benefits and costs (assume a discount rate of 5%).
- Overall NPV
- Return on investment
What is CAD system? The full name of CAD system is Computer-aided Design (CAD) system. It is the use of computer systems to assist in the creation, modification, analysis, or optimization of a design. The rationale of my companys management to establish this system is to replace our labor force by computerization in the daily operation. By doing this, our company can reduce labor costs, and increase the gross profits as the final goal.
Objectives of our Company to Establish the new CAD System:
The system is expected to be completed at the end of year 0 (2020). From 2021 to 2025, the new system is expected to reduce labor costs by $250,000 per year and to increase gross revenue $150,000 per year. The following Tables 1 and 2 show each cost component for the new CAD system as well as annual maintenance costs over a five-year period.
| Table 1 CAD System Components Year 0 Costs | ||
| Item | Quantity | Cost/each |
| Hardware | ||
| PCs | 50 | $1,700 |
| Network Cards | 50 | $50 |
| Servers | 2 | $3,000 |
| Color Laser Printers | 3 | $5,500 |
| Color Laser Plotters | 2 | $3,100 |
| Telecommunications | ||
| Backup Unit | 1 | $1,200 |
| Cabling w/plugs | 2,000 feet | $0.75/foot |
| Routers w/Firewall | 2 | $500 |
| Switches | 2 | $700 |
| Telephone Connection Costs | ----- | $5,000 |
| Software | ||
| CAD Software | 50 licenses | $3,500/license |
| Database | 50 licenses | $80 |
| Network | 50 licenses | $70 |
| Office Software | 50 licenses | $250/license |
| Services | ||
| In-house Trainer | 1 | $50,000 |
| AutoCAD Training | 50 hours | $75/hour |
| In-house Systems Personnel | 1 | $75,000 |
| Table 2 Estimated Annual Maintenance Costs | |||||
| 2021 | 2022 | 2023 | 2024 | 2025 | |
| PCs | $5,000 | $5,000 | $5,000 | $5,000 | $5,000 |
| Network cards | $500 | $500 | $500 | $500 | $500 |
| Servers | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 |
| Color laser printers | $500 | $500 | $500 | $500 | $500 |
| Plotters | $500 | $500 | $500 | $500 | $500 |
| Tape Backup | $500 | $500 | $500 | $500 | $500 |
| Cabling w/plugs (in feet) | $100 | $100 | $100 | $100 | $100 |
| Routers w/firewall | $100 | $100 | $100 | $100 | $100 |
| Switches | $100 | $100 | $100 | $100 | $100 |
| Telephone connection costs | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 |
| CAD software | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 |
| Database | $500 | $500 | $500 | $500 | $500 |
| Network | $500 | $500 | $500 | $500 | $500 |
| Office software | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 |
| In-house trainer | $40,000 | $30,000 | $20,000 | $10,000 | $10,000 |
| AutoCAD training | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 |
| In-House systems personnel | $75,000 | $76,000 | $77,000 | $79,000 | $82,000 |
Solution template:
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| Years of Project |
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| Year 2020 | Year 2021 | Year 2022 | Year 2023 | Year 2024 | Year 2025 | TOTALS |
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| Net economic benefit |
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| Discount rate |
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| Present Value of Benefits |
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| Net Present Value of all Benefits |
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| 2.5 points | ||
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| One-time COSTS |
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| Discount rate |
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| Recurring Costs |
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| Present Value of Recurring Costs |
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| Net Present Value of all Costs |
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| 2.5 points | ||
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| Overall Net Present Value |
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| 2.5 points | |
| Overall Return on Investment |
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| 2.5 points | ||
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| 10 points |
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Computerized Accounting With QuickBooks 2014
Authors: Kathleen Villani, James B. Rosa, Blanche Ettinger
1st Edition
0763860239, 9780763860233
