Question

Manage Your Health, Inc. (MYH) is listed in the Fortune 500 Company that provides a variety of healthcare service across the globe. They have 22,000 full-time and 10,000 part-time employees. A study found that MYH, Inc. pays 50% more than the industry average for their employee healthcare premiums, due to the poor health of its employees. Therefore, the company has planned to provide a web application that provides online functionalities to help their employees enrol and manage their health-management and recreational programs. This application will have the following capabilities.

• Allow employees to register for company-sponsored recreational programs such as soccer, netball, bowling, jogging and walking etc.
• Allow employees to register for company-sponsored classes and programs to help them manage their weight, reduce stress, and stop smoking etc.
• Track employees’ involvement in these recreational and health-management programs
• Over incentives for people to join the programs and do well in them

Project’s financial information

The project is expected to cost the company $700,000 for the web application development and $400,000 for web and database servers. The project is expected to take 1 year to complete. They believe that this application will help improve their employees’ health after a year of its rollout so that the company can negotiate lower healthy insurance premiums, providing a net saving of at $300 per employee per year for full-time employees and $100 per employee per year for part-time employees over next five years. The company does not expect any savings in employee healthcare premiums for the first year when the application will be up and running. A yearly budget of $200,000 has been set aside for the next five years for system maintenance. A new role “Application Support Engineer” has been created with the responsibility to work with the software engineering team to develop the application and to provide on-going application support after the roll out of the application. This role will cost the company $70,000 with a 7% yearly increase in the annual salary. Assume that the discount rate is 7%.

Task 1: Business case financial analysis

1. You are required to prepare a financial analysis up to year 5 using the table provided below for the MYH’s project in order to find the return of investment (ROI) and payback period of the project based on the financial information provided.

Discount rate	7%
PROJECT 1	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Total
Benefits
Discount Factor
Discount Benefit
Costs
Discount factor
Discount Cost
Discount Benefits-Discount Cost
Cumulative benefit-Cumulative Cost

2. Calculate the ROI of the project

3. Calculate the payback period of the project

4. Justify if the proposed project is worthwhile undertaking

If someone could answer this that would be appreciated, thanks. The same question is posted on Cheg elsewhere, but it doesn't address this question of the exercise.

Answer 1

Based on the given data, pls find below workings:

Assumption: It is assumed that the "net" savings of $300 and $ 100, respectively are after considering everything; That is, these savings are straight to the company's account;

- Since the support engineer work is to support the development phase as well as annual maintenance, the cost of engineer is considered from Year 0, with increment as stipulated.

Based on the above assumptions and based on the below workings, this investment seems highly recommendable as this is resulting in the significant savings.

The NPV is $28821461 and the Payback period is less than a year (0.2 years); Even ROI as well is significanly higher 2620% times;