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Martin is working to develop a preliminary cost Aco benefit analysis for a new client-server system He has identified a number of cost factors and values for the new system summarized in the

Martin is working to develop a preliminary costAc€?obenefit analysis for a new client-server system. He has identified a number of cost factors and values for the new system, summarized in the following tables:

Development CostsAc€??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 @ a$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 CostsAc€??Training

4 Oracle training registration              $3500/student

Development CostsAc€??New Hardware and Software

1 Development server                         $18,700

1 Server software (OS, misc.)             $1500

1 DBMS server software                    $7500

7 DBMS client software                     $950/client

Annual Operating CostsAc€??Personnel

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

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

Annual Operating CostsAc€??Hardware, Software, and Misc.

1 Maintenance agreement for server $995

1 Maintenance agreement for server $525

DBMS software

Preprinted forms                                 15,000/year @ $.22/form =$3300/year

The benefits of the new system are expected to come from two sources: increased sales and lower inventory levels. Sales are expected to increase by $60000 in the first year of the systemAc€?cs operation and will grow at a rate of 10% each year thereafter. Savings from lower inventory levels are expected to be $15,000 per year for each year of the projectAc€?cs life.

Using a format similar to the spreadsheets in this chapter, develop a spreadsheet that summarizes this projectAc€?cs cash flow, assuming a four-year useful life after the project is developed. Compute the present value of the cash flows, using an interest rate of 6%.

1. What is the NPV for this project?

2. What is the ROI for this project?

3. What is the break-even point? Should this project be accepted by the approval committee?

Apr 29 2020 View more View Less

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