Milestone #7 - Systems Analysis - Financial Analysis Purpose Universal Wellness Group (UWG) needs to perform a financial analysis of the system. A systems analyst needs to know how to calculate costs and benefits when conducting the analysis of system proposals, evaluating IT projects and making recommendations to management. In this milestone you will complete a financial analysis of the costs involved for a variety of systems implementation approaches. Background You estimate that by working full-time you could complete the project in about 12 weeks. Your consulting rate, which UWG agreed to, is $35 per hour. If you design the new system as a database application, you can expect to spend about $2,500 for a networked commercial package. After the system is operational and the staff is trained, UWG should be able to handle routine maintenance tasks without your assistance. As an alternative to in-house development, a vertical software package is available for about$12,000. The vendor offers a lease-purchase package requiring a$4,000 down payment, followed by two annual installments of $4.000 each. If UWG buy ual installments of $4,000 each. If UWG buys the package, it would take you about four weeks to install, configure, and test it, working full-time. The vendor provides free support during the first year of operation, but then UWG must sign a technical support agreement at an annual cost of $600. Although the package contains many of the features that UWG wants, most of the reports are pre-designed and it would be difficult to modify their layouts. No matter which approach is selected, UWG probably will need you to provide about 10 hours of initial training and support each week for the first three months of operation. After the new system is operational, it will need routine maintenance, file backups, and updating. These tasks will require about four hours per week and can be performed by a clinic staff member. In both cases, the necessary hardware and network installation will cost about $12.500. In your view, the useful life of the system will be about five years, including the year in which the system becomes operational Tasks 1. Provide an overview of the proposed system, including costs and benefits, with an explanation of the various cost-benefit types and categories. Complete the MS7-Cost Benefit Table Template. 2. Develop an economic feasibility analysis. Calculate the ROI and net present value (assume a discount rate of 10%) Use the MS7-Financial Template. 3. Provide a brief explanation of the various alternative development strategies that should be investigated if development continues, including in-house development and any other possible strategies that you have considered. Format Task 1) Cost or Benefit Eliminate three hours of overtime each week at $15 per hour Financial Impact Annual savings of 6 hours $15 hourly rate * 52 weeks * 1.5 overtime factor = 57,020 (six months of impact, or $3,510, will be available in Year 0) Description of Cost or Benefit Direct, operational, variable, positive benefit TERRA TE Task 2) Complete by using the Microsoft Excel MS7-Financial_Template. Task 3) Development Strategy Overview 1 Discount Rate 10% 3 Data For Plan A: In-House Development Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Costs: 6 Consultant time to develop system 7 Purchase necessary software platform 8 Hardware 9 Consultant training time 10 Office staff maintenance, backup and updating Total Costs: Benefits: 13 Eliminate overtime 14 Eliminate additional position 15 Eliminate daily errors Total Benefits: Cash Flow 18 ROI (Total Benefits - Total Costs)/Total Costs 227 19 NPV 20 Data For Plan B: Purchase Vertical Software Package $0.00 21 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Costs: 23 Purchase price for vendor package 24 Tech support contract 25 Consultant time to install, configure, and test 26 Hardware 27 Consultant training time 28 Office staff maintenance, backup and updating 29 Total Costs: Benefits: 31 Eliminate overtime 32 Eliminate additional position 33 Eliminate daily errors Total Benefits: Cash Flow 36 ROI = (Total Benefits - Total Costs)/Total Costs 37 NPV 34 ??? 50.00 CostBenefitSummary Cost-Benefit Costs Benefits Description 16,800.00 4,200.00 Developmental Developmental 1 Cost-Benefit Summary 2 Cost-Benefit Item 3 Plan A: In-House Development 4 Consultant time to develop system 5 Purchase necessary software platform 6 Plan B: Purchase Vertical Software Package 7 Purchase price for vendor package 8 Tech support contract 9 Consultant time to install, configure, and test 10 Cost & Benefits Common to Both Plans 11 Hardware 12 Consultant training time 13 Office staff maintenance, backup and updating 14 Eliminate overtime 15 Eliminate additional position 16 Eliminate daily errors 12,000.00 600.00 5,600.00 Developmental Operational After Year 1 Developmental 12,500.00 4,500.00 3,120.00 Developmental Developmental Per Year Costs (prorate for 1st Year) 7,020.00 Operational prorate for 1st Year) 31,200.00 Operational (prorate for 1st Year) 3,900.00 Operational (prorate for 1st Year) CostBenefitSummary cost-Benefit Milestone #7 - Systems Analysis - Financial Analysis Purpose Universal Wellness Group (UWG) needs to perform a financial analysis of the system. A systems analyst needs to know how to calculate costs and benefits when conducting the analysis of system proposals, evaluating IT projects and making recommendations to management. In this milestone you will complete a financial analysis of the costs involved for a variety of systems implementation approaches. Background You estimate that by working full-time you could complete the project in about 12 weeks. Your consulting rate, which UWG agreed to, is $35 per hour. If you design the new system as a database application, you can expect to spend about $2,500 for a networked commercial package. After the system is operational and the staff is trained, UWG should be able to handle routine maintenance tasks without your assistance. As an alternative to in-house development, a vertical software package is available for about$12,000. The vendor offers a lease-purchase package requiring a$4,000 down payment, followed by two annual installments of $4.000 each. If UWG buy ual installments of $4,000 each. If UWG buys the package, it would take you about four weeks to install, configure, and test it, working full-time. The vendor provides free support during the first year of operation, but then UWG must sign a technical support agreement at an annual cost of $600. Although the package contains many of the features that UWG wants, most of the reports are pre-designed and it would be difficult to modify their layouts. No matter which approach is selected, UWG probably will need you to provide about 10 hours of initial training and support each week for the first three months of operation. After the new system is operational, it will need routine maintenance, file backups, and updating. These tasks will require about four hours per week and can be performed by a clinic staff member. In both cases, the necessary hardware and network installation will cost about $12.500. In your view, the useful life of the system will be about five years, including the year in which the system becomes operational Tasks 1. Provide an overview of the proposed system, including costs and benefits, with an explanation of the various cost-benefit types and categories. Complete the MS7-Cost Benefit Table Template. 2. Develop an economic feasibility analysis. Calculate the ROI and net present value (assume a discount rate of 10%) Use the MS7-Financial Template. 3. Provide a brief explanation of the various alternative development strategies that should be investigated if development continues, including in-house development and any other possible strategies that you have considered. Format Task 1) Cost or Benefit Eliminate three hours of overtime each week at $15 per hour Financial Impact Annual savings of 6 hours $15 hourly rate * 52 weeks * 1.5 overtime factor = 57,020 (six months of impact, or $3,510, will be available in Year 0) Description of Cost or Benefit Direct, operational, variable, positive benefit TERRA TE Task 2) Complete by using the Microsoft Excel MS7-Financial_Template. Task 3) Development Strategy Overview 1 Discount Rate 10% 3 Data For Plan A: In-House Development Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Costs: 6 Consultant time to develop system 7 Purchase necessary software platform 8 Hardware 9 Consultant training time 10 Office staff maintenance, backup and updating Total Costs: Benefits: 13 Eliminate overtime 14 Eliminate additional position 15 Eliminate daily errors Total Benefits: Cash Flow 18 ROI (Total Benefits - Total Costs)/Total Costs 227 19 NPV 20 Data For Plan B: Purchase Vertical Software Package $0.00 21 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Costs: 23 Purchase price for vendor package 24 Tech support contract 25 Consultant time to install, configure, and test 26 Hardware 27 Consultant training time 28 Office staff maintenance, backup and updating 29 Total Costs: Benefits: 31 Eliminate overtime 32 Eliminate additional position 33 Eliminate daily errors Total Benefits: Cash Flow 36 ROI = (Total Benefits - Total Costs)/Total Costs 37 NPV 34 ??? 50.00 CostBenefitSummary Cost-Benefit Costs Benefits Description 16,800.00 4,200.00 Developmental Developmental 1 Cost-Benefit Summary 2 Cost-Benefit Item 3 Plan A: In-House Development 4 Consultant time to develop system 5 Purchase necessary software platform 6 Plan B: Purchase Vertical Software Package 7 Purchase price for vendor package 8 Tech support contract 9 Consultant time to install, configure, and test 10 Cost & Benefits Common to Both Plans 11 Hardware 12 Consultant training time 13 Office staff maintenance, backup and updating 14 Eliminate overtime 15 Eliminate additional position 16 Eliminate daily errors 12,000.00 600.00 5,600.00 Developmental Operational After Year 1 Developmental 12,500.00 4,500.00 3,120.00 Developmental Developmental Per Year Costs (prorate for 1st Year) 7,020.00 Operational prorate for 1st Year) 31,200.00 Operational (prorate for 1st Year) 3,900.00 Operational (prorate for 1st Year) CostBenefitSummary cost-Benefit