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
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
Problem 1PS
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
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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