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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 client-server system. He has identified a number of cost factors and values for the new system, summarized as follows:
Development Costs-Labour
2 Systems Analysts 50 days @ TZS 50,000/=/day
3 Programmers 40 days @TZS 50,000/=/day
Development CostsNew Hardware and Software
1 Development server with all key software installed TZS 22,000,000/=7 DBMS client software TZS 950,000/=/client
Annual Operating Costs
2 Programmers 10 days @TZS 50,000/=/day
1 Maintenance agreement for server and client TZS 2,000,000/=
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 25,000,000/= in the first year of the systems operation and will grow at a rate of 10% each year thereafter. Savings from lower inventory levels are expected to be TZS 12,000,000/= per year for each year of the projects life.
Required
Assuming a three-year lifecycle of the project is developed at an interest rate of 15%.
(a) What is the ROI for this project? [03 Marks]
(b) What is the payback period? [06 Marks]
(c) What is the NPV for this project? [07 Marks]
(d) Should this project be accepted by the management approval committee? Why? [04 Marks]

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