Question

You have been asked to calculate the Return on Investment (ROI) for a project whose development will be accomplished during a single calendar year with the go-live date of Jan 1^st   The project, to develop a new Web-based ordering and fulfillment system, has already been conceptualized, and the team has provided estimates and a partial resource plan. Labor Operating expenses in years 2 through 5 are projected to be $57,000 annually. Miscellaneous expenses in years 2 through 5 are projected to be $6,500 annually. The benefit is projected to be $225,000 the first year of operation, increasing 11% each year. Hardware cost that would be installed for development is $100,000. You’ll need to complete the resource plan, the 5 year planning sheet, and calculate a 5 year ROI. Please finish filling out these tables and answer the associated questions.

Development Team	Quantity	$/hour	Hours/each resource	Total Hours	Total Dollars
Program Director	1	98	500
Project Manager	1	98	1000
BA	1	98	750
Development Lead	1	83	1000
QA Lead	1	83	1000
Off-Shore Developers	6	25	750
Off-Shore QA	4	25	750
Total

Expense	Year 1	Year 2	Year 3	Year 4	Year 5
Labor
Hardware
Misc

Benefit	Year 1	Year 2	Year 3	Year 4	Year 5
Benefit

Question 1 [2 points]: What is the total labor cost of development?

Question 2 [2 points]: What is the total expense of this project projected to be for the first 5 year period?

Question 3 [2 points]: What is the total benefit projected to be for the first year?

Question 4 [2 points]: What is the total benefit projected to be for the first five years?

Question 5 [2 points]: Given ROI % = ((Benefit – Cost) / Cost)*100, what is the 5 year ROI for this project?

Question 6 [2 points]: If the company could just put the money to cover the project expenses in the bank (instead of doing this project) it could make a investment gain of 7% over this same 5 year period. Should the company invest in this project, or put the money in the bank? Why?

Question 7 [4 points]: Describe in your own words BRIEFLY why APO05 and APO06 are important to project funding selection based on ROI calculation.

Answer 1

1. The total labor cost of development is

total workers= 14

total hours= no of resources *hours for each resource

a. 500*1=500,1000*1=1000,750*1=750,1000*1=1000,1000*1=1000,1000*1=1000,750*6=4500 and 750*4=3000

Total labour cost= 500*98=49000 1000*98=98000,98*750=73500,1000*83=83000,83*1000=83000,83*1000=83000,25*4500=112500,25*3000=75000

total=657000

2. expense=500000

labor=57000*5=285000

Miscellaneous Cost=6500*5=32500

total=817500

3. total benefit projected in the first year is $225000

total benefit projected in the first five years= As benefit increases by 11% each year

First = 225000

Second Year =249750

third year= 277223

fourth year=307418

fifth year= 341567

4. Total benefit= 225000+249750+277223+307718+341567=1401258

5. Benefit = 1401258

cost= 817500

1401258-817500/817500*100=271.4%

6. The company should retain a part of the gain as retained earnings for the future growth of the company and the rest they can invest in any other projects for better returns and reputation.

7. Please give more clarity on the AP006 and AP005.