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Project Description: Purchase the FunSoft package: Cost $100,000 for software, $2,000 annual licensing fee for the life of the contract. There will be an annual

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Project Description:

  • Purchase the FunSoft package: Cost $100,000 for software, $2,000 annual licensing fee for the life of the contract. There will be an annual saving of $25,000 due to the layoff of a clerk.
  • Assume
    • six-year life for the software
    • 10% discount rate
  • Given the information above perform IRR, Simple Payback and NPV analysis
    • Download file Payback IRR NPV Worksheet.xlsxDownload Payback IRR NPV Worksheet.xlsx
    • Follow instructions in the following document
      • Cash Flow, NPV, Payback, and IRRLinks to an external site.

INSTRUCTIONS: Create a Worksheet to Calculate Cash Flow, NPV, Payback, and IRR

Projects that purport to save money or earn additional money in the future as a result of spending money now can be evaluated and compared using basic financial tools. A simple payback analysis determines how long it will be before the result of the project pays off the initial investment, and the internal rate of return (IRR) is a percentage similar to an interest rate that can be compared to other projects or investment opportunities.

  • Sample Project Description:
    • Purchase the FunSoft package: Cost $100,000 for software, $2,000 annual licensing fee for the life of the contract. There will be an annual saving of $25,000 due to the layoff of a clerk.
    • Assume
      • six-year life for the software
      • 10% discount rate

  • Given the information above perform IRR, Simple Payback and NPV analysis

121 A B C D E F G H 1 Payback, Internal Rate of Return and NPV Payback Year 0 1 2 3 4 5 6 Expense Income/Saving Annual Cash Flow Cummulative Cash Flow Internal Rate Of Return Payback (year) Discount Rate Present Value NPV

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