Question 2 [50 Marks]

Equity Technologies Corporation knows what it means to be prepared. Located in Mobile, Alabama, the company has long had plans and procedures in place to counter the threat posed by hurricanes and other severe weather.

For instance, Equity Technologies promotes family and individual preparedness and has set up a means of communicating with employees when dangerous weather threatens. Employees carry PSM4825 JULY 2023 TEST 5 laminated cards with contact information for supervisors and a voice recorded call-in number with updates about the company's status. But it was the risk of Y2K related disturbances that motivated Equity Technologies to get serious about its disaster preparedness and business continuity plans. "We are a small company which does business around the world. To be competitive my clients must feel confident that we are ready for anything," said Equity Technologies Corporation's President and CEO Cathy Anderson-Giles. "It wasn't hard to put together a plan, you just have to make it a priority."

First the company identified workers to serve as key contacts for the 72-employee operation. These key contacts then established safety and security teams which analysed Equity Technologies Corporation's entire emergency process. The teams realized that communication between the company and the outside world was the single most important operational factor in an emergency.

Not only does the company have emergency plans and procedures in place, but it has also made a commitment to review the plans and tools each year at the start of the hurricane season. "We have the annual review on our corporate calendar," said Anderson-Giles. "Being prepared means being ready for any kind of emergency, be it hurricane, utility disruption or man-made disaster."

Equity Technologies Corporation is investigating three different suppliers to purchase generators to power the phone system during utility outages.

The three different project options are compared with each other together with the cash flow projections and classification of investment and operational cost as follows:

Project Option 1

Project Option 1NowYear 1Year 2Year 3Year 4Year 5Year 6Investment and cost(outflows)-R5000-R5000-R1000-R500-R500-R1000-R1000Investment-R5000-R4000 Cost0-R1000-R1000-R500-R500-R1000R-1000Benefit and Earnings (inflows)00R3000R5000R5000R4000R4000Net cash Flow-R5000-R5000R2000R4500R4500R3000R3000

Project Option 2

Project Option 2NowYear 1Year 2Year 3Year 4Year 5Year 6Investment and cost(outflows)-R15000-R1000-R1000-R1000-R500-R500-R1000Investment-R15000 Cost0-R1000-R1000-R1000-R500-R500R-1000Benefit and Earnings (inflows)0R2500R5000R5000R5000R5000R5000Net cash Flow-R15000R1500R4000R4000R4500R4500R4000

Project Option 3

Project Option 3NowYear 1Year 2Year 3Year 4Year 5Year 6Investment and cost(outflows)-R3000-R3000-R2500-R1000-R500-R500-R500Investment-R3000-R2500-R2000-R500 Cost0-R500-R500-R500-R500-R500R-500Benefit and Earnings (inflows)00R3000R4000R4000R3000R3000Net cash Flow-R3000-R3000R500R3000R3500R2500R2500

1. Calculate the ROI for each of the three options for Equity Technologies Corporation [30 marks]

2. Calculate the multi-year ROI for each of the three project alternatives? [15 marks]

3. Using the annualised return which of the three project alternatives what would be the most beneficial option for Equity Technologies Corporation?

Project Option 1NowYear 1Year 2Year 3Year 4Year 5Year 6Investment and cost(outflows)-R5000-R5000-R1000-R500-R500-R1000-R1000Investment-R5000-R4000 Cost0-R1000-R1000-R500-R500-R1000R-1000Benefit and Earnings (inflows)00R3000R5000R5000R4000R4000Net cash Flow-R5000-R5000R2000R4500R4500R3000R3000