Appendix $1$A: Detailed Economic Feasibility Analysis for Dr$$nTeq

$35$

Annual Operating Costs$-$

Personnel

$2$ Programmer Analysts

$1$ System Librarian

Annual Operating Costs$-$

Hardware, Software, and Misc.

$1$ Maintenance agreement

for server

$1$ Maintenance agreement

for server

DBMS software

Preprinted forms

$15,000/$year @ $$\mathrm{.}22/$form

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.

Using a format like the spreadsheets in this chapter, develop a spreadsheet that summarizes this project's cash flow, assuming a $4-$year useful life after the project is developed. Compute the present value of the cash flows, using an interest rate of $9\%.$

What is the NPV for this project? What is the ROI for this project? What is the break$-$even point? Should this project be accepted by the approval committee?

APPENDIX $1$ A

DETAILED ECONOMIC FEASIBILITY ANALYSIS FOR DRONTEQ