Tugasan 4

Assignment 4:  USE YOUR KNOWLEDGE TO COMPUTE THE ECONOMIC FEASIBILITY OF THE CASE BELOW

1.         Consider the information given below AND ANSWER the questions following it:

                                                                                                           

Development Costs

Hardware                    RM 20,000

Software                     RM 10,000

Training                       RM   8,000

Annual Production Cost

Supplies                       RM   1,500

IS personnel                RM 30,000 in year 1;    10% annual increase

Maintenance                RM   3,000 per year

Expected Annual Benefits

Labor savings              RM 20,000 in year 1;   5% increase annually

Increase sales              RM 25,000 in year 1;   10% increase annually

Assumptions:

Discount rate                           15 %

Sensitivity factor (cost)           0.5

Sensitivity factor (benefit)      0.9

Questions:

1. Create a cost-benefit analysis table (for 4 years) to assess the economic feasibility of the proposed system.

2. What is the profitability index computed for this project?

           (Gain/Loss) / Dev Cost = -0.4680 > NOT Feasible!!!

3. Do you recommend that the organization fund this development project? Why and why not?

          No, because company will loss all the investment and profit.

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