In a conversation that you have with the president of your company the topic of how to align HR goals with company-wide department incentive goals came up. The incentive program will be known as HRIP. You are tasked with the assignment from the president to develop a recommendation that focuses on a department specific pay incentive goal program that addresses production and non-production personnel. Literally every level in the company will receive incentive program compensation above and beyond their base pay for achieving stretch-goals that drive: Top Line Revenue Bottom Line Profitability Improves Customer Satisfaction in a measurable way Improves quality Improves timeliness of product and service delivery and Drive down costs. It is understood that the new HRIP program must be self-funding and meet clearly defined funding objectives. Your recommendations will be discussed at the next executive offsite goal setting meeting. After much research you identified the following set of facts and assumption to work from. From this information you will develop an Executive Summary, Excel Financial Spreadsheet and a brief PowerPoint presentation. Below are the assumptions and questions that you need to work with and answer: Below are the facts of the situation. The cost of incentive compensation company-wide yearly payout will be $3,000,000 Initial Cost of Pay Incentive Goal Alignment software will be $350,000 Annual Software Maintenance Licensing will be $25,000 A Full Time HR Incentive Manager new hire is needed to drive the process ongoing, $80,000 plus benefits and bonus of $30,000 Outside consulting services of $100,000 year one Customer satisfaction that translates into increased profitability will be $1,000,000 Customer satisfaction that translates into reduced customer attrition will result in $1,000,000 in reduced acquisition costs Improvements in service and product quality will result in error rate reduction costs of $1,000,000 Reduction in product and service process timeliness will result in improved speed to market, reduced delivery timelines and faster billing that will save the company $250,000 Cost reduction savings will result in an additional savings of $850,000 Reduction in staff turnover based on comparable company programs to be 5% at a savings of $250,000 The Required Rate to have the project approved is 25% regardless of the WACC percentage Assume a seven (7) year straight line depreciation on Initial and Setup Costs Assume that the following cost of capital assumptions: o Long Term Debt is weighted at 40% and costs 8% o Preferred Stock is weighted at 15% and cost 15% o Common Stock is weighted at 45% and costs 20% Questions: o What is the initial cost of the new system plus setup costs, year zero not one year later o What is the annual depreciation in dollars for the new system, using straight line depreciation o What is the new operating expense per year o What is the Pretax Income after subtracting the yearly operating expenses and yearly depreciation from the sum of the expense reductions or benefits gained o What is 30% of the Pretax Income o What is the Net Income after subtracting the 30% taxes from the Pretax Income o Adding back the annual depreciation what is the Annual Cash Flow o What is the WACC o What is the Required Rate of Return o What is the NPV o What is the IRR o What is the project breakeven in years o Would you approve or decline the HRIP project from as financial perspective and why? o Now as is often the case the Comptroller states that the Customer Satisfaction profitability savings appear to a be soft saving and not hard dollar saving and stated that she would feel more comfortable if the number was cut to $500,000. If so is the HRIP System worthy of approval with a 25% Required Return? o All calculated cells outside of the pre-formatted spreadsheet formulas must be documented in the Excel spreadsheet, in detail