I've worked out the following problem, but I need to check my work to make sure I am on track. The spreadsheet at the bottom needs to be filled with the data that precede it.

Development Costs: Personnel

• 2 Systems Analysts 400 hours/ea @ $50/hour
• 4 Programmer Analysts 250 hours/ea @ $35/hour
• 1 GUI Designer 200 hours/ea @ $40/hour
• 1 Telecommunications Specialist 50 hours/ea @ $50/hour
• 1 System Architect 100 hours/ea @ $50/hour
• 1 Database Specialist 15 hours/ea @ $45/hour
• 1 System Librarian 250 hours/ea @ $15/hour

Development Costs: Training

• 4 team members need Oracle training registration @ $3,500/person

Development Costs: New Hardware and Software

• 1 Development server $18,700
• 1 Server software (OS, misc.) $1,500
• 1 DBMS server software $7,500
• 7 DBMS client software $950/client

Annual Operating Costs: Personnel

• 2 Programmer Analysts 125 hours/ea @ $35/hour
• 1 System Librarian 20 hours/ea @ $15/hour

Annual Operating Costs: Hardware, Software, and Miscellany

• 1 Maintenance agreement for server $995
• 1 Maintenance agreement for server $525
• Pre-printed forms 15,000/year @ $0.22/form

The benefits of the new system are expected to come from a few sources: data consistency, increased integration with suppliers, and improved security. These benefits are estimated to be $62,000 in the first year of the system's operation and will grow at a rate of 10% each year thereafter. An additional benefit from the system is based on lower inventory levels (due to improved integration). Savings from lower inventory levels are expected to be $30,000 per year for each year of the project's life. Using a format similar to the cost-benefit analysis spreadsheet (given in the resources) that summarizes this project's cash flow and assuming a five-year useful life after the project is developed, develop a cost-benefit analysis of the project. Compute the present value of the cash flows using an interest rate of 9%. What is the NPV for this project? What is the ROI for this project? What is the break-even point? Based on the economic analysis, should this project be approved to proceed further?

COST BENEFIT ANALYSIS (ROI and NPV) TEMPLATE FOR SOFTWARE PROJECTS

				YEAR
ITEM	2007 ($)	2008 ($)	2009 ($)	2010 ($)	2011 ($)	Total ($)
	BENEFITS
	Increased Sales
	Reduction in customer calls
	Reduced Inventory Costs
	Total Benefits
	Present Value (PV) of Benefits
	Cumulative PV of All Benefits
	DEVELOPMENT COSTS
	2 servers @ $125,000
	Printers/Networking Gear
	Software Licenses
	Server Software
	Development Labor
	Total Development Costs
	OPERATIONAL COSTS
	Hardware
	Software
	Operational Labor
	TOTAL OPERATIONAL COSTS
	TOTAL COSTS
	Present Value (PV) of Costs
	Cumulative PV of All Costs
	TOTAL BENEFITS - TOTAL COSTS
	Yearly NPV
	Cumulative NPV
	ROI
	NPV (Net Present value)
	Break-even Point
	Intangible Benefits