Question

In: Finance

You work for a large, successful organization, but lately many of the IT projects have experienced...

You work for a large, successful organization, but lately many of the IT projects have experienced disappointing results. You have been put on the steering committee to improve the selection process. The organization has decided that any new projects selected for implementation must first meet strict financial measures. It has set minimum values for ROI, NPV and Payback periods based on a three (3) year investment period. Based solely on the financial numbers presented below, answer the following questions:

Project cost: Year 0 through Year 3: $50,000; $0; $0; $0

Project revenue: Year 0 through Year 3: $0; $10,000; $30,000; $30,000

A. Calculate NPV for the project, using a 7 percent discount rate.

B. Calculate ROI for the project, using a 7 percent discount rate.

C. Calculate the Payback Period for the project.

Hint: You need to discount all cash flows.

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