Question

You will calculate the tangible and intangible costs and benefits of IS. Assume you are buying a number of personal computers (PCs) and implementing IS to monitor the traffic of people and goods in a port of entry in a specific country.

Perform the following tasks:

Estimate the possible IS costs. Justify the types of costs and amounts you have identified.

Estimate the benefits of your IS.

Calculate the net present value (NPV) and the ROI.

Present a Payback Analysis.

Note: Assume a discount rate of 12% and a 5-year time horizon.

ALSO NOTE YOU CAN COME UP WITH ANY ASSUMED DATA AND NUMBERS FROM ANYWHERE(So the issue of needed info won't be an issue).

For example

One time expense

10 Pcs @ $1500 per device

Training @ $1000 per employee/includes hourly rate and classes

Yearly costs

Integration software-Paragon ERP for 10 users @ $680/month

Write a 3- to 4-page report containing the possible IS costs and their justification.

Please include any references if need be.

Answer 1

As per case Assume you are buying a number of personal computers (PCs) and implementing IS to monitor the traffic of people and goods in a port of entry in a specific country.

discount rate of 12% and a 5-year time horizon.

Lets Assumse initial investmet is $ 1,00,000 and cash flow is $25000  

lets calculate the net cash flow

$25000- $1500-$1000-($680*12)

= $ 5340 for 1 year For next Year $25000- ($680*12) = $16840

PV@12%

Year 1 $5340 $4767.85

Year 2 $16840 $13424.74

Year 3 $16840 $11986.38

Year 4 $16840 $ 10702.12

Year 5 $16840 $9555.47

Total NPV in 5 years = $50436.57

Payback period will be between 6 years and 7 years when you recover your initial Investment.

Till 6 years you can be able to recover $ 89540 so now

in 6 years 226 days Payback will happen.