Martin is working to develop a preliminary costbenefit analysis for a new client-server system. He has identified a number of cost factors and values for the new system, summarized in the following tables:

Development CostsPersonnel
2 Systems Analysts	400 hours/ea @ $50/hour
4 Programmer Analysts	250 hours/ea @ $35/hour
1 GUI Designer	200 hours/ea @ $40/hour
1 Telecommunications Specialist	50 hours/ea @ $50/hour
1 System Architect	100 hours/ea @ $50/hour
1 Database Specialist	15 hours/ea @ $45/hour
1 System Librarian	250 hours/ea @ $15/hour
Development CostsTraining
4 Oracle training registration	$3500/student
Development CostsNew Hardware and Software
1 Development server	$18,700
1 Server software (OS, misc.)	$1500
1 DBMS server software	$7500
7 DBMS client software	$950/client
Annual Operating CostsPersonnel
2 Programmer Analysts	125 hours/ea @ $35/hour
1 System Librarian	20 hours/ea @ $15/hour
Annual Operating CostsHardware, Software, and Misc.
1 Maintenance agreement for server	$995
1 Maintenance agreement for server	$525
DBMS software
Preprinted forms	15,000/year @ $.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 similar to 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?