Table Of Contents

Sheet Title
Sheet Number
One-Time Costs
2
Recurring Costs
3
Recurring Benefis
4
Economic Feasibility
5
Break-Even Chart
6
Questions to be attached in a Word document
Purpose: The purpose of this case is to analyze the economic feasibility and practicality of replacing the existing suite of appli

Date Modified
Name

3/2/2013
Paul Lukose

the existing suite of applications with SAP.

Name of Cost
Sofware Licenses
Hardware
Network and Communications Upgrades
Training
Configuration and Implementation
Total

Cost Amount
$500,000
$75,000
$25,000
$25,000
$1,750,000
$2,375,000

Recurring Costs
Software License Maintenance Fees
New IT Employees (2x90,000)
Total Recurring Costs

Dollar Amount
$80,000
$180,000
$260,000

Year 1
Year 2
Year 3
$80,000 $80,000 $80,000
$180,000 $180,000 $180,000
$260,000 $260,000 $260,000

Year 4
Year 5
$80,000 $80,000
$180,000 $180,000
$260,000 $260,000

Recurring Benefits
Increased Profit Due to Increased Sales
Reduced Inventory Holdings Costs
Reduction in Clerical Workforce (4x $55,000)
Total Recurring Benefits

Dollar Amount
$750,000
$250,000
$220,000
$1,220,000

Year 1
Year 2
$750,000
$750,000
$250,000
$250,000
$220,000
$220,000
$1,220,000 $1,220,000

Year 3
Year 4
Year 5
$750,000
$750,000
$750,000
$250,000
$250,000
$250,000
$220,000
$220,000
$220,000
$1,220,000 $1,220,000 $1,220,000

Discount Rate

0.1

0
Benefits
Recurring Value of Benefits
Present Value Factor
Present Value of Benefits
Net Present Value of All Benefits
Costs
One-Time Costs
Recurring Costs
Present Value Factor
Present Value of the Recurring Costs
Net Present Value of all Costs
Overall Net Present Value
Cash Flow Analysis
Yearly NPV Cash Flow
Overall NPV Cash Flow

$0 $ 1,220,000.00 $ 1,220,000.00
1
0.909090909
0.826446281
$0 $ 1,109,090.91 $ 1,008,264.46
$0 $ 1,109,090.91 $ 2,117,355.37

$2,375,000
$260,000
0.909090909
$236,364
$2,611,364

$260,000
0.826446281
$214,876
$2,826,240

($2,375,000.00) ($1,502,272.73)

($708,884.30)

1
$2,375,000
$2,375,000

($2,375,000)
($2,375,000)

$872,727
($1,502,273)

$793,388
($708,884)

Year
3

Total

$ 1,220,000.00 $ 1,220,000.00 $ 1,220,000.00 $ 6,100,000.00

0.751314801
0.683013455
0.620921323
$ 916,604.06 $ 833,276.42 $ 757,524.01 $ 4,624,759.86
$ 3,033,959.43 $ 3,867,235.84 $ 4,624,759.86 $ 4,624,759.86

$260,000
0.751314801
$195,342
$3,021,582

$260,000
0.683013455
$177,583
$3,199,165

$260,000
0.620921323
$161,440
$3,360,605

$12,377.91

$668,070.83

$1,264,155.30

$721,262
$12,378

$655,693
$668,071

$596,084
$1,264,155

Total
$2,375,000
$1,300,000
$3,360,605
$3,360,605

Year
Net Present Value of Benefits
Net Present Value of all Costs

0
$0
$2,375,000

1
$1,109,091
$2,611,364

$5,000,000
$4,500,000
$4,000,000
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
0

2
$2,117,355
$2,826,240

3
4
5
$3,033,959 $3,867,236 $4,624,760
$3,021,582 $3,199,165 $3,360,605

Net Present Value of Benefits

Net Present Value of all Costs