As part of the planned expansion into online sales, Y is considering investment in several items...

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As part of the planned expansion into online sales, Y is considering investment in several items of IT hard and software. One such item is a centralised route planning piece of software (for the delivery vans). Drinkwater believes this will lead to increased profitability. There are two possible choices of software that could be selected; the investment information and estimated cashflows for each software package is shown below: Software options: T1 T2 T3 T4 Software X: Outlay (40,000) Cashflows 12,000 16,000 16,000 12,000 Software Z: Outlay (50,000) Cashflows 18,000 15,000 17,000 19,000 Y has a cost of capital of 12%. Each piece of software has a useful life of 4 years. The scrap value will be zero for both. Required: a) Calculate the payback for each software package. (5 marks) b) Calculate the net present value for each software package. (10 marks) c) Explain the term Internal Rate of Return (IRR) (10 marks) d) Advise Y as to which software package should be chosen. (5 marks) e) Explain how the use of FinTech could be beneficially incorporated into the online retail sales project. (10 marks) (Total 40 marks) [LOS: 2, 4, 5] As part of the planned expansion into online sales, Y is considering investment in several items of IT hard and software. One such item is a centralised route planning piece of software (for the delivery vans). Drinkwater believes this will lead to increased profitability. There are two possible choices of software that could be selected; the investment information and estimated cashflows for each software package is shown below: Software options: T1 T2 T3 T4 Software X: Outlay (40,000) Cashflows 12,000 16,000 16,000 12,000 Software Z: Outlay (50,000) Cashflows 18,000 15,000 17,000 19,000 Y has a cost of capital of 12%. Each piece of software has a useful life of 4 years. The scrap value will be zero for both. Required: a) Calculate the payback for each software package. (5 marks) b) Calculate the net present value for each software package. (10 marks) c) Explain the term Internal Rate of Return (IRR) (10 marks) d) Advise Y as to which software package should be chosen. (5 marks) e) Explain how the use of FinTech could be beneficially incorporated into the online retail sales project. (10 marks) (Total 40 marks) [LOS: 2, 4, 5]

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a Payback period calculation Software X Year 0 Cash outflow of 40000 Year 1 Cash inflow of 12000 Run... View the full answer