Instructions

• You must upload two files. An Excel file with your calculations and a Word File with the summary of your answers. Please use image captures (screenshots) to show the summary of your Excel calculations within the Word document. Under supplemental materials for week 1, there is a video of a cropping tool that can be used for capturing specific sections of your screen.

Problem 2

Assume that the monetary benefits of an information system are $40,000 at the beginning of the project and increasing benefits of $10,000 a year for the next five years (year 1 = $50,000, year 2 = $60,000, year 3 = $70,000, year 4 = $80,000, year 5 = $90,000). One-time development costs were $80,000, and recurring costs were $45,000 over the duration of the systems life. The discount rate for the company was 11 percent. Using a six-year time horizon (y0, y1, y2, y3, y4, y5) do the following:

1. Calculate the net present value of these costs and benefits
2. Calculate the overall return on investment
3. Complete a break-even analysis (at what point does break-even occur?)
4. Generate a graphical representation of the break-even analysis in case that it occurs at any point from y0 to y5