You have recently started a consulting assignment where you have been asked to prepare a short economic analysis for a problem that your client is facing. The client is a dental office. The office has grown over the past couple of years from a practice of one dentist to a practice of five dentists. The manual processes that sufficed to track appointments and billing for the founder, Dr. Torres, are no longer sustainable with the addition of the four new dental partners. Your consulting practice lead, Darwin, has provided you the following information and asked you to prepare the economic assessment to be presented to the client.
Assume monetary benefits of a new automated dental office scheduling and billing system of $50,000 in the 2nd year and increasing incremental benefits of $50,000 a year for the next 3 years. There is a monthly cost for cloud hosting services of $5,000. Hosting costs are estimated to increase 3% per year. There are annual license fees of $150/user. There will be 20 users for the life of the system. The initial software purchase has a onetime purchase cost of $50,000 in year 1. The system will go-live at the start of the 2nd year. The discount rate that the finance manager for the office has asked you to use is 10%.
Using a 4 year horizon (current plus 3), calculate the net present value of this project.
Calculate the overall ROI for the new dental office system.
What intangible benefits do you think the system might have?
What intangible costs do you think the dental office is experiencing?