question b

ABCD is an established tuition center that has several branches in Johor Bahru. Recently, the top management has decided to consider an information system to help their growing business. You have been hired as the system analyst to handle the project. Before continuing with the development of the project, you need to assess the economic feasibility from the budget that the company plans to invest. Table 1 shows the information given by the company. Table 1: Estimated cost and expected benefits for ABCD Estimated Costs: Expected Benefits: Hardware RM 20,000 Savings RM 2,000 per month Software RM 10,000 Increase sales RM 25,000 Stationeries RM 5,000 Motivation Course RM 10,000 Salary RM 30,000 Assumptions: Discount rate 15% Sensitivity factor (cost) 0.5 Sensitivity factor (benefit) 0.9 Annual increment (costs) 5% Annual increment (benefit) 15% (a) Calculate the cost-benefit estimation using the Present Value (PV) analysis (for 3 years) to assess the economic feasibility for the ABCD project proposal. (b) What is the PI value for this PV analysis? What is your recommendation based on the PI value and justify it