solution

Preamble:An information systems project will cost $45,000 to develop (Year 0). When the system becomes operational after a one-year development period, operational costs will be $14,000 during each year of the system’s five-year useful life. The system will produce benefits of $30,000 in the first year of operation and increasing benefits of $400 a year for the next four years. The discount rate for the company is 11 percent.

(Round off all values to two decimal places)

	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	TOTALS
Net Benefit	$0	$30,000	$30,400	$30,800	$31,200	$31,600
Discount Rate Factor
Present Value of Benefits
a(i) NPV of all BENEFITS
One-time COSTS
Recurring Costs
Discount Rate Factor
Present Value of Recurring Costs
a(ii) NPV of all COSTS
Overall NPV
b Overall ROI