Hershey is working to develop a preliminary cost-benefit analysis for a new client- server system. She has identified a number of cost factors and values for the new system, summarized in the following tables. Development Cost- Personnel 2 System Analyst 4 Programmer Analyst 1 GIU Designer 400 hours/ea @ $50/hour 250 hours/ea @ $35/hour 200 hours/ca@$40/hour 1 Telecommunications. Specialist 1 System Architect 50 hours/ea @ $50/hour 100 hours/ca@ $50/hour 15 hours/ea @ $45/hour 250 hours/ea @ $15/hour 1 Database Specialist 1 System Librarian Development Costs- Training 4 Oracle training registration $3500/student Development Costs-New Hardware and Software 1 Development server $18,700 I Server software (OS,misc.) $1500 1 DBMS server software 7 DBMS client software $7500 $950/client Annual Operating Costs- Personnel 2 Programmer Analyst 1 System Librarian 125 hours/ea @ $35/hour 20 hours/ca@ $15/hour Software and Misc. Annual Operating Costs - New Hardware, 1 Maintenance agreement for server 1 Maintenance agreement for server DBMS software $995 $525 Preprinted Forms 15,000/year @ $2.22/ form The benefits of the new system are expected to come from two sources: increased sales and lower inventory levels. Sales are expected to increase by $30,000 in the first year of the system's operation and will grow at a rate of 10% cach year thereafter. Savings from lower inventory levels are expected to be $15,000 per year for each year of the project's life. (a) Using a format similar to spreadsheet in this chapter, develop a spreadsheet that summarizes this project's cash flow, assuming a four-year useful life after the project is developed. Compute the present value of the cash flows, using an interest rate of 9%. (b) What is the NPV for this project? (c) What is the ROI for this project? (d) What is the break-even point? (e) Should this project be accepted by the approval committee? Scanned with CamScanner Hershey is working to develop a preliminary cost-benefit analysis for a new client- server system. She has identified a number of cost factors and values for the new system, summarized in the following tables. Development Cost- Personnel 2 System Analyst 4 Programmer Analyst 1 GIU Designer 400 hours/ea @ $50/hour 250 hours/ea @ $35/hour 200 hours/ca@$40/hour 1 Telecommunications. Specialist 1 System Architect 50 hours/ea @ $50/hour 100 hours/ca@ $50/hour 15 hours/ea @ $45/hour 250 hours/ea @ $15/hour 1 Database Specialist 1 System Librarian Development Costs- Training 4 Oracle training registration $3500/student Development Costs-New Hardware and Software 1 Development server $18,700 I Server software (OS,misc.) $1500 1 DBMS server software 7 DBMS client software $7500 $950/client Annual Operating Costs- Personnel 2 Programmer Analyst 1 System Librarian 125 hours/ea @ $35/hour 20 hours/ca@ $15/hour Software and Misc. Annual Operating Costs - New Hardware, 1 Maintenance agreement for server 1 Maintenance agreement for server DBMS software $995 $525 Preprinted Forms 15,000/year @ $2.22/ form The benefits of the new system are expected to come from two sources: increased sales and lower inventory levels. Sales are expected to increase by $30,000 in the first year of the system's operation and will grow at a rate of 10% cach year thereafter. Savings from lower inventory levels are expected to be $15,000 per year for each year of the project's life. (a) Using a format similar to spreadsheet in this chapter, develop a spreadsheet that summarizes this project's cash flow, assuming a four-year useful life after the project is developed. Compute the present value of the cash flows, using an interest rate of 9%. (b) What is the NPV for this project? (c) What is the ROI for this project? (d) What is the break-even point? (e) Should this project be accepted by the approval committee? Scanned with CamScanner
