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Kapinga is working to develop a preliminary cost benefit analysis for a new client - server system. He has identified a number of cost factors
Kapinga is working to develop a preliminary costbenefit analysis for a new clientserver system. He has identified a number of cost factors and values for the new system, summarized as follows:
Development CostsLabour
Systems Analysts days @ TZS day
Programmers days @TZS day
Development CostsNew Hardware and Software
Development server with all key software installed TZS DBMS client software TZS client
Annual Operating Costs
Programmers days @TZS day
Maintenance agreement for server and client TZS
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 TZS in the first year of the systems operation and will grow at a rate of each year thereafter. Savings from lower inventory levels are expected to be TZS per year for each year of the projects life.
Required
Assuming a threeyear lifecycle of the project is developed at an interest rate of
a What is the ROI for this project? Marks
b What is the payback period? Marks
c What is the NPV for this project? Marks
d Should this project be accepted by the management approval committee? Why? Marks
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