Company X is trying to decide whether to build a new service by managing everything internally or utilize a cloud solution. An analysis by an IT team determines an internal solution has a start up cost of $77,400 and a monthly cost of $8300 to maintain. The cloud solution's start up cost is $1250, but has a recurring monthly cost of $9593. The benefits are the same for both projects: $90,000 for the first year, $100,000 for the second, and $120,000 for the remaining years.
Financial speaking, over a five year period, which solution is better? Justify your answer by determining NPV, ROI, and payback analysis. Use a discount rate of 10%.
The calculations must be presented in a "by-hand" format. That is, no embedded Excel or "numbers only" tables are allowed without an explicit demonstration of the formula being applied. You may, of course, use Excel to check your work. Make sure your explicit computation matches the values you may pull from Excel!