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Management Studies

Assume you are working as a systems analyst in Company XYZ, and is conducting (along with your team-mates) a cost-benefit analysis for a customer who has hired your organization to design/develop a new information system. While doing this analysis, you estimate that the new system will cost $40,000 to construct (time 0) and will have ongoing maintenance and operational costs of $20,000, $15,000 and $8,000 over three years, respectively. The benefits from the system have been estimated to be $19,500 per year. Your customer estimates that the system will have 3-year useful life and currently has a discount rate of 12%. Calculate the following:

a. What is the total Net Present Value (NPV) of the benefits?

b. What is the total Net Present Value (NPV) of the costs?

c. What is the total NPV (benefits minus costs)?

d. When does the project break-even (if ever) (BE SPECIFIC)?

e. What is the Return of Investment?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M92025166

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