Question: A new Information Systems (IS) project has been proposed that is expected to produce cost savings but also an increase in revenue. The initial cost
A new Information Systems (IS) project has been proposed that is expected to produce cost savings but also an increase in revenue. The initial cost to establish the system is estimated to be $670,000. The remaining cash flow data is presented in the following table.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Increased Revenue ($) | $40,000 | $120,000 | $145,000 | $215,000 | $215,000 |
| Cost Savings ($) | $25,000 | $55,000 | $75,000 | $75,000 | $150,000 |
| Maintenance Expense ($) | $100,000 | $100,000 | $125,000 | $150,000 | |
| Initial Expense ($) | $670,000 |
Requirement: Assume the cost of capital is 7%.
Calculate the return on investment (ROI) for this project. Please make sure to show your work
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