SlowRider Inc. had a rudimentary business intelligence $($BI$)$ system. Analysts at SlowRider

Inc. pulled data from three different ERP systems, loaded the data into Excel spreadsheets,

and emailed those spreadsheets to the senior managers each month. However, some

managers complained that they didn't understand how to get the information they needed,

others complained that the data were not accurate, and still others ignored the spread$-$

sheets. SlowRider established a project team to look at acquiring a state$-$of$-$the$-$art business

intelligence system. After several interviews with all the managers, the project team was

ready to develop the business case.

The project team estimated benefits of the new BI system as follows:

$5$ percent increase in sales through better$-$focused sales campaigns, which should

increase gross margins by $$200,000$ in year $1$ and $$300,000$ in years $2$ and $3.$

$10$ percent increase in inventory turnover through better purchasing, which should

reduce inventory carrying costs by $$100,000$ in year $1$ and $$150,000$ in years $2$ and $3.$

The project team estimated costs over an expected $3-$year life as follows:

After interviewing managers at other firms that have already implemented similar BI systems,

the project team then estimated that the initiative would have the following risks. L$017-6$

a$.$ Disregarding the risk, calculate the following for the BI investment:

Payback period

NPV $($assume $10$ percent discount rate$)$

IRR

Accounting rate of return

b$.$ Recalculate the payback period, NPV$,$ IRR, and ARR considering the risk.

c$.$ Prepare a value proposition for the BI investment. Should SlowRider pursue the

investment? What other issues should they consider?