Calculate the net present value of these costs and benefits

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Reference no: EM132282511

Assume that the monetary benefits of an information system are $40,000 at the beginning of the project and increasing benefits of $10,000 a year for the next five years (year 1 = $50,000, year 2 = $60,000, year 3 = $70,000, year 4 = $80,000, year 5 = $90,000). One-time development costs were $80,000, and recurring costs were $45,000 over the duration of the system’s life. The discount rate for the company was 11 percent. Using a six-year time horizon (y0, y1, y2, y3, y4, y5) do the following:

Calculate the overall return on investment

Complete a break-even analysis (at what point does break-even occur?)

Generate a graphical representation of the break-even analysis in case that it occurs at any point from y 0 to y 5.

Reference no: EM132282511

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