Problems and Exercises

4-17. Assuming monetary benefits of an information system at $85,000 per year, one-time costs of $75,000, recurring costs of $35,000 per year, a discount rate of 12 percent, and a five-year time horizon, calculate the net present value of these costs and benefits of an information system. Also calculate the overall return on investment of the project and then present a break-even analysis. At what point does break-even occur?

4-19. Do you think a project scope statement is required when all the information is already contained in a baseline project plan?

4-20. Based on your past online experience of any Internet application, comment on its design.

4-21. During a walkthrough, how will you ensure that your presentation is effective?

4-22. Assume monetary benefits of an information system of $40,000 the first year and increasing benefits of $10,000 a year for the next five years (year 1 = $50,000, year 2 = $60,000, year 3 = $70,000, year 4 = $80,000, year 5 = $90,000). One-time development costs were $80,000 and recurring costs were $45,000 over the duration of the systems life. The discount rate for the company was 11 percent. Using a six-year time horizon, calculate the net present value of these costs and benefits. Also, calculate the overall return on investment and then present a break-even analysis. At what point does break-even occur?

4-23. Change the discount rate for Problem and Exercise 4-22 to 12 percent and redo the analysis.

4-24. Change the recurring costs in Problem and Exercise 4-22 to $40,000 and redo the analysis.