Question 1: a) The table shown below lists the cash flow of two IT projects. Complete missing items and find the NPV, ROI, and Payback for each project. Which project should be selected? Year0 Yeart Year2 Year3 Year4 total Discount Rate 9% Discounted costs Project Discounted factor Costs $70,000 $80,000 $35,000 $30,000 $20,000 Benefits SO $65,000 $75,000 $120,000 $150,000

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Question 1:
a) The table shown below lists the cash flow of two IT
projects. Complete missing items and find the NPV,
ROI, and Payback for each project. Which project
should be selected?
Discounted
factor
Costs $70,000 $80,000 $35,000 $30,000 $20,000
Discounted costs
Benefits $0 $65,000 $75,000 $120,000 $150,000
Discounted
benefits
Discounted Cash
flow
Net cash flow
Discounted costs
| Year0 Year1 Year2 Year3 Year4 total
Discount Rate -9%
Answer:
0
Discounted
benefits
Discounted Cash
flow
Net cash flow
Project2
Costs $110,000 $90,000 $30,000 $37,000 $50,000
Benefits SO $65,000 $100,000 $170,000 $170,000
Select
NPV =
ROI =
Payback in year
NPV =
ROI =
Payback in year
Support Key
Has strong
Project1
Project
business 50% 20
objectives
Totals
b) The following table describes four projects in terms
of scores in a set of evaluation criteria. Complete
WSM provided in the table below and get the
weighted score for each project and then determine
which project should be selected and why.
Criteria Weight Project 1
Weighted
score
score
internal 40% 45
sponsor
Has strong
customer 30% 30
support
Can be
implemented 10%
in one year or
less
100%
0
80
Project 1
Project 2
score
60
80
20
Project 2
60
Weighted
score
score
60
40
40
20
because
Project 3
Weighted
score
Answer:
Which project should be selected and why?
Transcribed Image Text:Question 1: a) The table shown below lists the cash flow of two IT projects. Complete missing items and find the NPV, ROI, and Payback for each project. Which project should be selected? Discounted factor Costs $70,000 $80,000 $35,000 $30,000 $20,000 Discounted costs Benefits $0 $65,000 $75,000 $120,000 $150,000 Discounted benefits Discounted Cash flow Net cash flow Discounted costs | Year0 Year1 Year2 Year3 Year4 total Discount Rate -9% Answer: 0 Discounted benefits Discounted Cash flow Net cash flow Project2 Costs $110,000 $90,000 $30,000 $37,000 $50,000 Benefits SO $65,000 $100,000 $170,000 $170,000 Select NPV = ROI = Payback in year NPV = ROI = Payback in year Support Key Has strong Project1 Project business 50% 20 objectives Totals b) The following table describes four projects in terms of scores in a set of evaluation criteria. Complete WSM provided in the table below and get the weighted score for each project and then determine which project should be selected and why. Criteria Weight Project 1 Weighted score score internal 40% 45 sponsor Has strong customer 30% 30 support Can be implemented 10% in one year or less 100% 0 80 Project 1 Project 2 score 60 80 20 Project 2 60 Weighted score score 60 40 40 20 because Project 3 Weighted score Answer: Which project should be selected and why?
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