Problem:
Pine valley furniture recently implemented a new internship program and has begun recruiting interns from nearby university campuses. As part of this program, interns have the opportunity to work alongside a systems analysis. This shadowing opportunity provides invaluable insights into the systems analysis and design process. recently you were selected for a six month internship at pine valley furniture, and Jim Woo has been assigned as your supervisor.
At an initial meeting with Jim, he explains that pine valley furniture is currently involved with two important systems development projects, the customer tracking system and webstore. The purpose of the Customer tracking systems is to enable the PVF marketing group to track customer purchase activity and sales trends better. The webstore project will help move the company in to the twenty-first century by facilitating online furniture purchases, with an initial focus on corporate furniture buying. During your meeting with Jim, he reviews the documentation assembled for both systems, Mr. Woo hands you a copy of the Customer Tracking System's economic feasibility analysis. He mentions that he would like to modify the spreadsheet to reflect the information provided in the following table. Because you are familiar with a spreadsheet products, you volunteer to make the modifications for him.
|
year 0 |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
| Net economic benefit |
0 |
50000 |
$ 50,000.00 |
$ 50,000.00 |
$ 50,000.00 |
$ 50,000.00 |
|
|
|
|
|
|
|
| One-time costs |
$ 47,000.00 |
|
|
|
|
|
|
|
|
|
|
|
|
| Recurring costs |
0 |
$ 32,000.00 |
$ 32,000.00 |
$ 32,000.00 |
$ 32,000.00 |
$ 32,000.00 |
Question 1. Modify the customer tracking system's economic feasibility analysis to reflect the modification mentioned in this problem. Use descount rate of 10 percent. After the changes are made, what are the new overall NPV, ROI and BEP?
Question 2: Modify the workseet created in using discount rates of 12 and 14 percent. What impact do these values have on the overall NPV, ROI, and BEP?
NPV = Net present value
ROI = Return on investment
BEP = Break Even Point