Problem:
You now have the option of investing in half of the upgrade now and getting half of the savings for two years. Option A is then to invest an additional $150,000 in year 3 and get all of the savings for the final three years. Option B is to spend $125,000 to demo in year 3 and switch wholly to hosted cloud service in year three at an annual cost of $150,000.
Required:
Question: Plot these cash flows for each option, calculate the ROI and payback period for each, and calculate the NPV for each.
Note: Explain all steps comprehensively.