Part 1

Use Excel to create a workbook to perform a cost benefit analysis of the project. The workbook should use fixed and variable cell references where applicable to support rapid assessment of the business case under different assumptions for interest rates, benefits and costs. The workbook should contain the following worksheets.

Table of Contents - Should describe the purpose of the workbook, list and describe each worksheet in the workbook.

Costs - Should list the implementation and maintenance costs for the project contained in Tables 1 & 2. Please calculate and display the sum for each cost category.

Benefits - Should list the recurring benefits for the project contained in Table 3. You should also calculate and display the sum of all benefits.

Cost Benefit Analysis - Should contain the discount rate, costs, benefits, present value factor, and the present value of costs and benefits for each year of the project. It should also include the Overall Net Present Value (NPV) for the proposed project, which is the net present value of all benefits minus the net present value of all costs.

Part 2

Please answer the following questions using the workbook you created in Part 1.

1. Assume a discount rate of 15%. What is the overall net present value for the project? When will the project break-even? Should EMB move forward with the project and proceed with implementing SAP? Explain your answer.

2. Assume a discount rate of 30%. What is the overall net present value for the project? When will the project break-even? Should EMB move forward with the project and proceed with implementing SAP? Explain your answer.

3. Assume the recurring value of benefits due to increased sales was overly optimistic and net income due to increased sales is only $375,000 instead of $750,000. In addition, assume the benefits due to a reduction in inventory holding costs are only $50,000 instead of $250,000. Assuming a discount rate of 15%, what is the overall net present value for the project? When will the project break-even? Should EMB move forward with the project and proceed with implementing SAP? Explain your answer.

4. Assume the recurring value of benefits due to increased sales was overly optimistic and net income due to increased sales is only $375,000 instead of $750,000. In addition, assume the benefits due to a reduction in inventory holding costs are only $50,000 instead of $250,000. At what discount rate is the project economically feasible? (Please note that the discount rate you calculate must include four decimal places of accuracy e.g. 12.3456%). Should EMB move forward with the project and proceed with implementing SAP? What are the implications of the changes to the economic feasibility of the project? Explain your answer.

Case 1 Extreme Mountain Bikes Cost Benefit Analysis Introduction During his junior year in college, Bob Cooper was invite by his friend Tom Newton to go on a mountain biking trip. Bob owned a bike but primarily used it for short trips around campus. He'd never been mountain biking before and did not know what to expect. Tom told him it was a lot of fun and since Tom had been doing it for a couple of years, he could help Bob out. Bob agreed to give it a try and one cool Friday afternoon in the fall, Bob and Tom drove a short distance to a nearby off-road mountain bike trail. Bob was immediately surprised by the extreme ruggedness of the trail. The narrow trail twisted and turned through trees, travelled up and down steep ravines, and contained numerous "rock gardens" through which he was supposed to ride. The challenging terrain made it difficult for Bob to keep his balance and required tremendous focus and concentration. As the continued to ride that afternoon, Bob's comfort level on the bike and trail improved and he began to enjoy the challenges of maneuvering a bike skillfully over rough terrain while being outdoors with friends. It was a fantastic experience and the start of a lifelong passion for mountain biking Bob graduated from college a short time later and found a job selling life insurance. The pay was good, and the job was stable and secure. His early interest in mountain biking had grown and he rode his bike every morning before going to work. When he wasn't riding, he was spending his spare time maintaining and repairing his collection of three mountain bikes. Bob had purchased three different bikes because he was unable to find a bike to perfectly meet his needs. Each bike he owned had its own strengths and weaknesses. One bike was highly maneuverable, but had problems with overcoming large obstacle Another bike was good with large obstacles, but was heavy and difficult to maneuver. His third bike excelled at going down large, extremely steep hills but lacked the maneuverability and clearance of his first two bikes. One day Bob was talking to a friend ho he had recently sold a life policy to about mountain biking and the friend realized hov passionate and knowledgeable Bob was about the activity and asked Bob if had every thought of starting his own business. The client knew an investor who might be willing to back a new company focused on mountain bikes. Bob met with the investor and decided to open a business to design, manufacture, and sell mountain bikes. They decided to name the company Extreme Mountain Bikes (EMB) and the company would focus on selling high performing all around mountain bikes at a reasonable cost. EMB hired employees to help with product design, engineering, accounting, fulfillment, and sales. They quickly developed a prototype bike and approached several local stores about selling the bike. The stores were willing to give it a try and the bikes started to sell. In the first year of business, EMB was able to sell nearly a hundred bikes. Bob realized that his first year success meant there was a market for his product, so he decided to expand aggressively. He had a superior product at a reasonable pric The Problem Bob recognized early on that the success of EMB would depend on the ability of his employees to work together in an integrated fashion providing exceptional customer