1. Read the case study in Appendix A, and answer the following questions:

1. Perform a financial analysis for the project by calculating its:
   • NPV, [25 marks]
   • ROI, [10 marks]
   • Payback period; [10 marks]

using a discount rate of 9% and a 5-year projection. Use Excel to perform the above analysis, and use formulae wherever possible. (Please submit the Excel file as well.)

Appendix A - The EasyDrive School of Motoring Case Study The EasyDrive School of Motoring was established in Glasgow in 1992. Since then, the school has grown steadily and now has several offices in most of the main cities of Scotland. However, the school is now so large that more and more administrative staff are being employed to cope with the ever- increasing amount of paperwork. Furthermore, the communication and sharing of information between offices, even in the same city, is poor. The Director of the school, Dave MacLeod, feels that too many mistakes are being made and that the success of the school will be short-lived if he does not do something to remedy the situation. He has approached your company to develop a database system to support the day-to-day operation of the school. In addition, he would like to part of the system to be open to their customers, so that customers can perform booking and inquiry functions online, without the need for administrative support. Initial estimates suggest a budget of HK$2 million for the project. Of the budget, $400,000 is for the software, and $800,000 for hardware costs. The rest is for consulting and development services. The annual maintenance would be 15% of the hardware cost, and 12% of the software costs. You estimate that the benefits resulting from this project are mainly savings in administrative costs of HK$500,000 for year 1, HK$600,000 for year 2, and HK$800,000 for years 3 to 5