Question

Appendix 1A- Detailed Economic Feasibility Analysis for Tune Source 33 then can be used to project the increase in the number of service calls made each week. For example, if the system per mits the average service response time to fall to 4 hours, the management believes that each truck will be able to make I6 service calls per week on average-an increase of 4 calls per week. With each truck making 4 additional calls per week and the average revenue per call at $150, the revenue increase per truck per week is S600 (4 $150). with 10 trucks in ser vice 50 weeks per year, the average annual revenue increase will be $300,000 (s600 X 10 X 50) L System Architect 1 Database Specialist I System Librarian 100 houre550hour 15 hours'es $45/hour 250 hoursiea S15hour Development Costs-Training 4 Oracle training registration 53500student Development Costs-New Hardware and Software I Development server I Server software (OS, misc.) I DBMS erver software 7 DBMS client software $18,700 $1500 $950rclient The Decker Company management is unsure whether Annual Operating Costs-Personnel 2 Programmer Analysts L System Librarian 125 hourslea@535/bour 20 hoursfea@$15/hour the new system will enable response time to fall to 4 hours on average, or will be some other number. Therefore, man agement has developed the following range of outcomes that may be possible outcomes of the new system, along with probability estimates of each outcome occurring Annual Operating Costs-Hardware, Softvware, and Misc 1 Maintenance agreement for server $995 I Maintenance agreement for server $525 DBMS software 15,000lyear 5.22/5orm Likelihood 20% New Response Time CallsTruck/week Preprinted forms The benefits of the new system are expected to come from two sources: increased sales and lower inventory levels. Sales are expected to increase by $30,000 in the first year of the system's operation and will grow at a rate of 10% each year thereafter. Savings from lower inventory levels are expected to be $15,000 per year for each year of the project's life. 3 hours 4 hours Given these figures, prepare a spreadsheet model that com putes the expected value of the annual revenues to be pro- duced by this new system. 4. Martin is working to develop a preliminary cost-benefit anal for a new client-server system. He has identified a number of cost factors and values for the new system, summarized in the following tables: Using a format similar to the spreadsheets in this chap- ter, develop a spreadsheet that summarizes this project's cash flow, assuming a 4-year useful life after the project is devel- oped. Compute the present value of the cash flows, using an interest rate of 9%. Development Costs-Personnel 2 Systems Analysts Programmer Analyst 400 bours/ea @ 550 hour 250 hours/ea@$35/hour 200 hours/ea @$40/hour What is the NPV for this project? What is the ROl for this project? What is the break-even point? Should this proj ect be accepted by the approval committee? 1 GUI Designer Telecommunications Specialist 50 hoursea @ $50/hour

the solutions to mini case #4 are not posted in the textbook solutions. Any help on this?

Answer 1

1 Cost benefit analysis 2 Cost factors 3 System analysts 4 Programmer analysts 5 GUI Designer 6 Telecommunications specialist 7 System architect 8 Database specialist 9 System librarian each @ $/hour Costs in $ 50 40000 35 35000 Quanity Hours 4 100 15 45 15 3750 1 Developmemt costs-training 2 Oracle training registration Number of students 4 $/student 3500 14000 4 Development costs- new hardware and software 5 Development server 6 Server software(OS,miso. 7DBMS server software 8 DBMS client software 1 18700 18700 950 per client

hours/each @ $/hour 20 Annual Operating costs - Personnel 21 Programmer analysts 22 System librarian 23 24 Annual Operating Costs Hardware, Software, and Misc. 25 Maintenance agreement for server 26 Maintenance agreement for server DBMS software 27 Preprinted forms 28 29 Sources of benefits of the new system 30 Increased sales 31 lower inventory levels 32 33 Epected increase in sales 34 Growth rate 35 36 Expected saving from lower inventory levels 37 38 Project's cash flow 39 Useful life 2 125 35 8750 20 15 995 $ 525 $ 995 525 78300 150005.22/[email protected]/forms 30000 S 10% each year 15000 per year for each year of project's life 4 years
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