Assignment: Time Value of Money Calculations
The IT department has requested an update in its server population. This upgrade is required to maintain a competitive position. The CEO has asked that you evaluate the project and submit a recommendation to her, in terms of whether the company should move forward with this request. The calculated value of the project is a reduction of expenses, including power and replacement costs, as shown in Table-1:
|
Year
|
Decrease in Expenses
|
|
1
|
$30,000.00
|
|
2
|
$100,000.00
|
|
3
|
$120,000.00
|
|
4
|
$100,000.00
|
|
5
|
$30,000.00
|
Assume the impact after five years to be immeasurable. The cost of capital to the firm is currently 8% and the cost of the project today is $286,000.
Required:
• Calculate the net present value of the project
• Calculate the internal rate of return
• Calculate the payback period
• Calculate the discounted payback period
Submit an Excel file with your calculations, and a 2-to-5-page paper that explains the calculations and provides your final assessment and decision. Justify your recommendations. The paper must be submitted as a Word document and it must follow APA style guidelines.