4 5 2 Part A As a financial controller for Blue Sky Technologies it is your resonsibility to provide feedback on proposed capital spending. In the previous year the company has been considering the purchase of a new ERP (Enterprise Resource Planning) software that will drastically change the administration of the business. It is believed that increased automation will improve the overall processes of the organization, providing more accurate/timely reports to management as well as significantly decrease the amount of time that administration staff have to spend on current reporting responsiblities. Based on industry standards it is believed this software will be effective for approximately 10 years. Below, you will find information related to the projected cash flows. Complete an NPV analysis for Part A. Please provide your recommendation. on whether Blue Sky should proceed with this initiative in Part B below. 5 Initial cost of hardware $125,450 7 Annual cost of software license $34,700 3 Annual reduction to administration wages (years 1-5) $71,200 Annual reduction to administration wages (years 6-10) DConsulting fee for system review (every 2 years) $24,400 $35,000 1 Research costs associated with renewal (end of year 10) 2 Increased IT costs (years 1-2) $12,000 $7,500 3 4 Discount rate 8% 5 5 B 9 , 1 Description of relevant costs Years 0 1 2 3 4 5 6 7 8 9 10 3 4 5 Part B In any analysis it is important to consider both the quantitative and qualitiative factors. In addition to your analysis above, please note some of the non-financial issues that could impact your decision to either recommend or not recommend going ahead with the new software implementation. At the end of Part B please provide your 5 reccomendation to either accept or reject this proposed project. 7 B