The Decker Company operates $10$ service trucks with crews, offering various plumbing, heating, and cooling repairs to homes. On average, they respond to service requests within $6$ hours. Each truck handles around $12$ service calls weekly, generating an average of $$150$ per call. These trucks are active for $50$ weeks a year. However, scheduling and routing challenges lead to significant idle time each week.

Decker's management is considering buying a routing and scheduling software package to improve response times and crew productivity. They are currently struggling to quantify the potential advantages of this system.

One method is to estimate the reduction in service response time with the new system, which can help predict an increase in weekly service calls. For instance, if the new system reduces the average response time to $4$ hours, management expects each truck to handle $16$ calls per week, $4$ more than currently. Given that each additional call generates $$150,$ this means an extra $$600$ per truck each week $(4$ calls at $$150$ each$).$ With $10$ trucks operating for $50$ weeks a year, this equates to an annual revenue boost of $$300,000($$$600$ multiplied by $10$ trucks and then by $50$ weeks$).$

Decker Company's management is uncertain if the new system will consistently reduce the average response time to $4$ hours, or if it will result in a different figure. As a result, they have outlined a range of potential outcomes that the new system might bring, each with an estimated probability of occurrence:

New Response Time # Calls$/$Truck$/$Week Likelihood

$2$ hours $2020\%$

$3$ hours $1830\%$

$4$ hours $1650\%$

Based on these numbers, create a spreadsheet model to calculate the anticipated annual revenue from this new system.

Martin is conducting an initial cost$-$benefit analysis for a new client$-$server system. He has pinpointed various cost elements and their respective values for the new system, as outlined in the tables below:

Development Costs$$Personnel

$2$ Systems Analysts $400$ hours$/$ea @ $$50/$hour

$4$ Programmer Analysts $250$ hours$/$ea @ $$35/$hour

$1$ GUI Designer $200$ hours$/$ea @ $$40/$hour

$1$ Telecommunications Specialist $50$ hours$/$ea @ $$50/$hour

$1$ System Architect $100$ hours$/$ea @ $$50/$hour

$1$ Database Specialist $15$ hours$/$ea @ $$45/$hour

$1$ System Librarian $250$ hours$/$ea @ $$15/$hour

Development Costs$$Training

$4$ Oracle training registration $$3,500/$student

Development Costs$$New Hardware and Software

$1$ Development server $$18,700$

$1$ Server software $($OS$,$ misc.$)$ $$1,500$

$1$ DBMS server software $$7,500$

$7$ DBMS client software $$950/$client

Annual Operating Costs$$Personnel

$2$ Programmer Analysts $125$ hours$/$ea @ $$35/$hour

$1$ System Librarian $20$ hours$/$ea @ $$15/$hour

Annual Operating Costs$$Hardware$,$ Software, and Misc.

$1$ Maintenance agreement for server $$995$

$1$ Maintenance agreement for server $$525$

DBMS software

Preprinted forms $15,000/$year @ $$\mathrm{.}22/$form

The anticipated benefits of the new system stem from two main areas: an increase in sales and reduced inventory costs. It is projected that sales will rise by $$30,000$ in the first year following the system's implementation and will continue to grow at a $10\%$ annual rate. Additionally, annual savings due to lower inventory levels are expected to be $$15,000$ throughout the project's duration.

Create a spreadsheet similar to those in this chapter, detailing the cash flow for this project over a $4-$year period post$-$development. Calculate the present value of these cash flows using a $9\%$ interest rate.

Determine the project's Net Present Value $($NPV$),$ Return on Investment $($ROI$),$ and the break$-$even point. Based on these calculations, decide whether the approval committee should greenlight this project.