Economic Feasibility Assessment for EMB

This workbook contains the following sheets:

1. One Time Costs -- implementation and maintenance costs for the project
2. Recurring Costs -- implementation and maintenance costs for the project
3. Recurring Benefits -- benefits of the project
4. Economic Feasibility -- do it?
5. Break Even Chart -- data
***Purpose***
The purpose of this workbook is to decide whether or not Extreme Mountain Bikes
should replace their current hardware and software with SAP
Workbook created by : Tucker Hess
Last modified on 10/10/2014

One Time Costs

Implementation Costs
Software Licenses
Hardware
Network and Communications Upgrades
Training
Configuration and Implementation
Total One Time Cost

Dollar Amount
($500,000.00)
($75,000.00)
($25,000.00)
($25,000.00)
($2,750,000.00)
($3,375,000.00)

Recurring Costs (Annual)

Maintenance Costs
Software License Maintenance Fees
New IT Employees (2 x 90,000)

Dollar Amount
-$80,000.00
-$180,000.00

Total Recurring Costs

-$260,000.00

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

ring Benefits
Dollar Amount
$750,000.00
$250,000.00
$220,000.00
$1,220,000.00

Discount Rate

15%
0

($3,375,000.00)
$0.00
1.000
($3,375,000.00)
($3,375,000.00)

$0.00
($260,000.00)
0.870
($226,086.96)
($3,601,086.96)

$0.00
1.000
$0.00
$0.00

$1,220,000.00
0.870
$1,060,869.57
$1,060,869.57

Overall Net Present Value

($3,375,000.00)

($2,540,217.39)

Cash Flow Analysis

Yearly NPV Cash Flow
Overall NPV Cash Flow

($3,375,000.00)
($3,375,000.00)

$834,782.61
($2,540,217.39)

Costs
Implementation Costs (One Time)
Maintenance Costs (Recurring)
Present Value Factor
Present Value of Costs
Net Present Value of All Costs
Benefits
Recurring Benefits
Present Value Factor
Present Value of Benefits
Net Present Value of all Benefits

2
$0.00
($260,000.00)
0.756
($196,597.35)
($3,797,684.31)

$0.00
$0.00
$0.00
($260,000.00)
($260,000.00)
($260,000.00)
0.658
0.572
0.497
($170,954.22)
($148,655.84)
($129,265.95)
($3,968,638.53) ($4,117,294.37) ($4,246,560.33)

$1,220,000.00
0.756
$922,495.27
$1,983,364.84

$1,220,000.00
0.658
$802,169.80
$2,785,534.64

$1,220,000.00
0.572
$697,538.96
$3,483,073.60

$1,220,000.00
0.497
$606,555.62
$4,089,629.22

($1,814,319.47)

($1,183,103.89)

($634,220.77)

($156,931.11)

$725,897.92
($1,814,319.47)

$631,215.58
($1,183,103.89)

$548,883.12
($634,220.77)

$477,289.67
($156,931.11)

Year
6

$0.00
($260,000.00)
0.432
($112,405.17)
($4,358,965.50)

$0.00
($260,000.00)
0.376
($97,743.63)
($4,456,709.13)

$0.00
($260,000.00)
0.327
($84,994.46)
($4,541,703.59)

$0.00
($260,000.00)
0.284
($73,908.23)
($4,615,611.82)

$1,220,000.00
0.432
$527,439.67
$4,617,068.89

$1,220,000.00
0.376
$458,643.19
$5,075,712.08

$1,220,000.00
0.327
$398,820.16
$5,474,532.24

$1,220,000.00
0.284
$346,800.14
$5,821,332.38

$258,103.39

$619,002.94

$932,828.65

$1,205,720.56

$415,034.49
$258,103.39

$360,899.56
$619,002.94

$313,825.70
$932,828.65

$272,891.92
$1,205,720.56

Year
10

11

12

13

14

$0.00
$0.00
$0.00
$0.00
$0.00
($260,000.00)
($260,000.00)
($260,000.00)
($260,000.00)
($260,000.00)
0.247
0.215
0.187
0.163
0.141
($64,268.02)
($55,885.24)
($48,595.86)
($42,257.27)
($36,745.45)
($4,679,879.84) ($4,735,765.08) ($4,784,360.94) ($4,826,618.21) ($4,863,363.66)

$1,220,000.00
0.247
$301,565.34
$6,122,897.72

$1,220,000.00
0.215
$262,230.73
$6,385,128.46

$1,220,000.00
0.187
$228,026.72
$6,613,155.18

$1,220,000.00
0.163
$198,284.11
$6,811,439.29

$1,220,000.00
0.141
$172,420.96
$6,983,860.25

$1,443,017.88

$1,649,363.37

$1,828,794.24

$1,984,821.08

$2,120,496.59

$237,297.32
$1,443,017.88

$206,345.49
$1,649,363.37

$179,430.86
$1,828,794.24

$156,026.84
$1,984,821.08

$135,675.51
$2,120,496.59

15

16

17

18

19

$0.00
$0.00
$0.00
$0.00
$0.00
($260,000.00)
($260,000.00)
($260,000.00)
($260,000.00)
($260,000.00)
0.123
0.107
0.093
0.081
0.070
($31,952.57)
($27,784.84)
($24,160.73)
($21,009.33)
($18,268.98)
($4,895,316.23) ($4,923,101.07) ($4,947,261.80) ($4,968,271.13) ($4,986,540.11)

$1,220,000.00
0.123
$149,931.27
$7,133,791.52

$1,220,000.00
0.107
$130,375.02
$7,264,166.54

$1,220,000.00
0.093
$113,369.58
$7,377,536.12

$1,220,000.00
0.081
$98,582.25
$7,476,118.37

$1,220,000.00
0.070
$85,723.69
$7,561,842.06

$2,238,475.29

$2,341,065.47

$2,430,274.32

$2,507,847.24

$2,575,301.95

$117,978.71
$2,238,475.29

$102,590.18
$2,341,065.47

$89,208.85
$2,430,274.32

$77,572.91
$2,507,847.24

$67,454.71
$2,575,301.95

Totals
20
$0.00
($260,000.00)
0.061
($15,886.07)
($5,002,426.18)

$1,220,000.00
0.061
$74,542.34
$7,636,384.40
$2,633,958.21

$58,656.27
$2,633,958.21

($3,375,000.00)
($5,200,000.00)
($5,002,426.18)
($94,692,158.78)

$24,400,000.00
$7,636,384.40
$111,757,437.35
$17,065,278.57
$17,065,278.57

$17,065,278.57

0
$0.00
$3,375,000.00

Net Present Value of All Benefits

Net Present Value of All Costs

1
$1,060,869.57
$3,601,086.96

$7,000,000.00

$6,000,000.00

$5,000,000.00

$4,000,000.00

$3,000,000.00

$2,000,000.00

$1,000,000.00

$0.00
0

Year
2
$1,983,364.84
$3,797,684.31

3
$2,785,534.64
$3,968,638.53

4
$3,483,073.60
$4,117,294.37

5
$4,089,629.22
$4,246,560.33

Net Present Value of All Benefi

Net Present Value of All Costs

10

ar
6
$4,617,068.89
$4,358,965.50

7
$5,075,712.08
$4,456,709.13

Net Present Value of All Benefits

Net Present Value of All Costs

8
$5,474,532.24
$4,541,703.59

9
$5,821,332.38
$4,615,611.82

10
$6,122,897.72
$4,679,879.84