Pearson eText for Essentials of Systems Analysis and Design -- Instant Access (Pearson+)
Pearson eText for Essentials of Systems Analysis and Design -- Instant Access (Pearson+)
6th Edition
ISBN: 9780137612420
Author: Joseph Valacich, Joey George
Publisher: PEARSON+
Question
Book Icon
Chapter 4, Problem 21PE
Program Plan Intro

Economic feasibility analysis of an information system:

Monetary benefits of an information system = $85,000 per year.

One-time costs = $75,000

Recurring cost = $35,000 per year.

Discount rate = 12%

Time period = 3 years

Explanation of Solution

Overall Return on Investment (ROI):

Overall return on investment can be calculated as:

Overall ROI = (Overall NPV / NPV of all costs)

Overall NPV = (NPV of all benefits – NPV of all costs)                    

Explanation of Solution

Break-Even Analysis (BEA):

  • Break even analysis is carried out by determining NPV of yearly cash flows.
  • The yearly cash flows are calculated by subtracting present values of recurring costs from the present value of yearly benefits.
  • The overall NPV cash flow is total cash flow of the preceding years.
  • After determining NPV yearly cash flows, it is found that break even occurs between year one and two.
  • This is because Overall NPV is non-negative (positive)...

Blurred answer
Students have asked these similar questions
I would like to know the main features about the following 3 key concepts:1. Backup Domain Controller (BDC)2. Access Control List (ACL)3. Dynamic Memory
In cell C21, enter a formula to calculate the number of miles you expect to drive each month. Divide the value of number of miles (cell A5 from the Data sheet) by the average MPG for the vehicle multiplied by the price of a gallon of gas (cell A6 from the Data sheet).
Microsoft Excel
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Principles of Information Systems (MindTap Course...
Computer Science
ISBN:9781305971776
Author:Ralph Stair, George Reynolds
Publisher:Cengage Learning
Text book image
Principles of Information Security (MindTap Cours...
Computer Science
ISBN:9781337102063
Author:Michael E. Whitman, Herbert J. Mattord
Publisher:Cengage Learning
Text book image
Information Technology Project Management
Computer Science
ISBN:9781337101356
Author:Kathy Schwalbe
Publisher:Cengage Learning
Text book image
Database Systems: Design, Implementation, & Manag...
Computer Science
ISBN:9781305627482
Author:Carlos Coronel, Steven Morris
Publisher:Cengage Learning
Text book image
Database Systems: Design, Implementation, & Manag...
Computer Science
ISBN:9781285196145
Author:Steven, Steven Morris, Carlos Coronel, Carlos, Coronel, Carlos; Morris, Carlos Coronel and Steven Morris, Carlos Coronel; Steven Morris, Steven Morris; Carlos Coronel
Publisher:Cengage Learning
Text book image
Enhanced Discovering Computers 2017 (Shelly Cashm...
Computer Science
ISBN:9781305657458
Author:Misty E. Vermaat, Susan L. Sebok, Steven M. Freund, Mark Frydenberg, Jennifer T. Campbell
Publisher:Cengage Learning