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Economic Feasibility Analysis of Information Systems (IS) Projects Case Assignment 1
Economic Feasibility Analysis of Information Systems (IS) Projects Case Assignment
Order ID 53563633773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages
Description/Paper Instructions
Economic Feasibility Analysis of Information Systems (IS) Projects Case Assignment
Economic Feasibility Analysis of Information Systems (IS) Projects
Assume that you are assigned to assess the economic feasibility of a project on developing information systems (IS) for a company. The development of the information systems results in increase in sales of three products that the company manufactures.
However, the development of the IS application involves development costs (such as, labor, training, software, and hardware) which is incurred at the beginning of the project. The project also involves annual operating costs (such as, salaries, software licenses, and hardware upgrades). The estimated benefits and costs of the IS project are presented in table 1.
Use Microsoft Excel to analyze the economic feasibility of the IS project. The layout of the spread sheet is shown in figure 1. Please consider the time value of money and assume an interest rate of 10% on investment. Using a 5-year horizon, calculate the net present value of the costs and benefits. Also calculate the overall return on investment (ROI) and the break-even point of the IS project. The formulae to calculate net present values, ROI, and the break-even point are presented in table 2.
Table 1 – Estimated Benefits and Costs of the Project
2013 2014 2015 2016 2017 Benefits Increased sales from Product 1 $ 20000 $ 22500 $ 24500 S 25500 Increased sales from Product 2 $ 35000 $ 36000 $ 47500 $ 40500 Increased sales from Product 3 $ 45000 $ 56500 $ 48000 $ 51000 Development Costs (one-time) Labor $ 40000 Training $ 20000 Software $ 22000 Hardware $ 20000 Operating Costs (Recurring Costs) Salaries $ 35000 $ 45750 $ 56500 $ 62250 Software Licenses $ 7000 $ 6000 $ 5000 $ 4500 Hardware Upgrades $ 7000 $ 6250 $ 5500 $ 4700
Table 2 – Formulae Used in the Worksheet
Total benefit Sum of increased sales from products 1, 2, and 3 Discount rate 1/(1+Interest rate)n Where n=number of years in future
Present value of benefits =Total benefit * Discount Rate Total Development cost Labor cost + Training cost + Software cost + Hardware cost Total Operating Costs Salaries + Software Licenses + Hardware Upgrades Total Costs Total Development Cost + Total Operating Cost Present Value of Total Costs Total Costs * Discount Rate Overall Net Present Value (NPV) Present Value of all benefits* – Present Value of all Total Costs* Return on Investment Overall NPV/Present Value of all costs* Break-even Analysis (Yearly NPV Cash Flow) Present Value of benefits for the year – Present value of total costs for the year Break-even Analysis ( Overall NPV Cash Flow) Overall NPV Cash Flow of the previous year + Yearly NPV Cash Flow Break-even Point (Yearly NPV Cash Flow-Overall NPV Cash Flow)/ Yearly NPV Cash Flow. Use the data from the year in which the overall NPV Cash Flow is Positive
*Over the duration of the project
Economic Feasibility Analysis of Information Systems (IS) Projects Case Assignment
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The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. 10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper.
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