Question

I could really use some help with this system analysis question I got. Thank you!!!!

Using the following data, create a table similar to the one at the bottom of the page. Note that there are 8 years of data here vs. 5 years in the table. You will have to add the extra 3 years to your table. There is also a different discount factor for each year.

Calculate the net present value, the payback period, and the return on investment using a discount rate of 1 percent for the following systems development project. The development costs for the system were $225,000.

Year	Anticipated Annual Benefits	Expected / ongoing Annual Operating Costs	Discount Factors at 1 Percent
1	$55,000	$5,000	.9901
2	$60,000	$5,000	.9803
3	$70,000	$5,500	.9706
4	$75,000	$5,500	.9610
5	$80,000	$7,000	.9515
6	$80,000	$7,000	.9242
7	$80,000	$7,000	.9327
8	$80,000	$8,000	.9235

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Total RMO cost/benefit analysis Value of benefits $ 889,000 $ 1,139,000 $ 1,514,000 $- 1 $ 2,077,000 0.6830 $2,927,000 0.6209 0.9091 0.8264 0.7513 Discount factor (10%) $ - $ 808,190 $ 941,270 $ 1.137,468 $ 1,418,591 $ 1,817,374 Present value of benefits $6,122,893 Development costs $(1,336,000) $(1,336,000) Ongoing costs $ (241,000) $ (241,000) $ (241,000) $ (241,000) $ (241,000) 0.8264 0.9091 0.7513 0.6830 0.6209 Discount factor (10%) $ (219,093) $ (199,162) $(181,063) $ (164,603) $ (149,637) $1913,559) Present value of ongoing costs $11,336,000) $ 589,097 $ 742,107 $ 956,405 PV of net of benefits and costs $ 1,253,988 $ 1,667,737 Cumulative NPV $11,336,000) $3,873,334 10 Payback period $1746,903) $ (4.769) $951,609 $2,205,597 2 years + 4796 / (4796 +951,609) = 2 + .005 or 2 years and 2 days 16,122,893 - (1,336,000 + 913,559))/(1,336,000+ 913,559) = 172.18% 11 5-year return on investment

Answer 1

(92 2) Benefits Discount facto (wild present Value 76120 5 Discoursest facie sent ost Berhe year yearl year I year 1 Year 1 year year I year year to tak analysis (s) 1 6 2 6) 3 (6) 406 (8) 60 7 (0) 8 (3) Value of 55000 60000 70000 75000 8000 80000 80000 80,000 T 09901 0.9803 0.9706 0.9610/0.9515 0.9242 0.9327 0.9235 54456 55,818 67,942 72,075. 7 73936 74646 73880 551843 Development cost (225000) (225000) 5 ongoing 5000 sooo 6500) Esod 400g noog 2000) 8000) 10.9901 0.9803 0.9706 0.9610 0.9515 0.9242 0.9327 0.9235 present (4951) 61902) (5338) 62896660 64706529638847,525) 8) bo9 49505 53916 62,604 6678916945967466 6808266392 q cumulative (225,00 (1 752A) (12157)(58,973) 7814 77273144739 212826 27938 10) pay Back Period = 3 years +(58975/5897547814)+ 3 + 0.883 or 3 years and g days - (5 51843 -(225000 +47,525))/(225000 + 47525) X1100 Investment =(551843 - (272525)/272525x100 | = 102.5% Value Ipv of het of benefit and cost NDVI 8 year returnan