Question

Use the following table solve the Benefit Cost Ratio , NPV benefits ( Please show excel formulas)
						Discount rate	0.08
		0	1	2	3
System A
Costs
	Hardware	14000	3000	3000	3000
	Software	12000	2000	2000	1000
	Services	2500	2500	2500	2500
Benefits
	Increased productivity		15000	10000	5000
	Lower Error rates		18000	5000	6000
System B
Costs
	Hardware	15000	3000	3000	3000
	Software	12000	4000	2000	5000
	Services	7000	3000	3000	1000
Benefits
	Increased productivity		7000	10000	10000
	Reduced Work Force		15000	15000	15000

Answer 1

Year	Hardware	Software	Services	Total Outflow	Beinfits Increased productivity	Beinfits Lower Error rates	Total Inflow	PV Factor	Present Value of Outflow	Present Value of Inflows
0	14,000.00	12,000.00	2,500.00	28,500.00	-		-	1	28,500.00	-
1	3,000.00	2,000.00	2,500.00	7,500.00	15,000.00	18,000.00	33,000.00	0.92593	6,944.48	30,555.69
2	3,000.00	2,000.00	2,500.00	7,500.00	10,000.00	5,000.00	15,000.00	0.85734	6,430.05	12,860.10
3	3,000.00	1,000.00	2,500.00	6,500.00	5,000.00	6,000.00	11,000.00	0.79383	5,159.90	8,732.13
									47,034.42	52,147.92

Benefit Cost Ratio	Present Value of Inflows/Present Value of Outflow
Benefit-Cost Ratio	0.90
NPV	Present Value of Inflows-Present Value of Outflow
NPV	5,113.50

Year	Hardware	Software	Services	Total Outflow	Beinfits Increased productivity	Beinfits Lower Error rates	Total Inflow	PV Factor	Present Value of Outflow	Present Value of Inflows
0	15,000.00	12,000.00	7,000.00	34,000.00	-		-	1	34,000.00	-
1	3,000.00	4,000.00	3,000.00	10,000.00	7,000.00	15,000.00	22,000.00	0.92593	9,259.30	20,370.46
2	3,000.00	2,000.00	3,000.00	8,000.00	10,000.00	15,000.00	25,000.00	0.85734	6,858.72	21,433.50
3	3,000.00	5,000.00	1,000.00	9,000.00	10,000.00	15,000.00	25,000.00	0.79383	7,144.47	19,845.75
									57,262.49	61,649.71

Benefit Cost Ratio	Present Value of Inflows/Present Value of Outflow
Benefit-Cost Ratio	1.08
NPV	Present Value of Inflows-Present Value of Outflow
NPV	4,387.22

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