Question

In: Finance

Develop an economic feasibility analysis, using payback analysis, ROI, and present value (assume a discount rate...

Develop an economic feasibility analysis, using payback analysis, ROI, and present value (assume a discount rate of 10%) using the table below

System in place

In-House System

Vertical Software

Year 1

6 hours overtime total

$6,480 per employee

Support Staff 7 People

Plus, new staff member

12 weeks, hourly salary $35 total $16,800

Commercial package $2,500

10 hrs. weekly training $4200

4 hrs. weekly maintenance $22.5 total of 4,320

Hardware Cost $12,500

Vertical package $12,000

4 weeks to install $5,600

10hrs weekly training $4,200

Free Support first year

4 hrs. weekly maintenance $22.5 total of 4,320

Hardware Cost $12,500

Year 2

6 hours overtime total

$6,480 per employee

4 hrs. weekly maintenance $22.5 total of 4,320

Technical Support $600

4 hrs. weekly maintenance $22.5 total of 4,320

Year 3

6 hours overtime total

$6,480 per employee

4 hrs. weekly maintenance $22.5 total of 4,320

Technical Support $600

4 hrs. weekly maintenance $22.5 total of 4,320

Year 4

6 hours overtime total

$6,480 per employee

4 hrs. weekly maintenance $22.5 total of 4,320

Technical Support $600

4 hrs. weekly maintenance $22.5 total of 4,320

Year 5

6 hours overtime total

$6,480 per employee

4 hrs. weekly maintenance $22.5 total of 4,320

Technical Support $600

4 hrs. weekly maintenance $22.5 total of 4,320

Total

$259,200

$57,600

$58,300

Saved in 5 years

$201,600

$200,900

Solutions

Expert Solution

System in place In-House System Vertical Software
year 1          51,840 12 weeks, hourly salary 16800 vetical package 12000 5
commercial package 2500 installation 5600
weekly training 4200 weekly training 4200
weekly maintenace 4320 weekly maintenace 4320
hardware   12500 hardware   12500
       40,320        38,620
year 2 Technical Support 600
         51,840 weekly maintenace 4320 weekly maintenace 4320
4920
year 3
         51,840 weekly maintenace 4320 Technical Support 600
weekly maintenace 4320
4920
year 4 Technical Support 600
         51,840 weekly maintenace 4320 weekly maintenace 4320
4920
year 5          51,840 Technical Support 600
weekly maintenace 4320 weekly maintenace 4320
4920
      2,59,200        57,600        58,300
saved                         -       2,01,600     2,00,900 compared with system in place
Payback period 5 years 3.50             3.45
ROI 64% 63%
Present value 49,103.47 49,287.03
Net Present Value     8,496.53     9,012.97

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