Economic analysis carried out during project identification

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1) The economic analysis carried out during project identification and selection is rather superficial. Why is this? Consequently, what factors do you think tend to be most important for a potential project to survive this first phase of the life cycle?

2) Consider your use of a PC at either home or work and list tangible benefits from an information system. Based on this list, does your use of a PC seem to be beneficial? Why or why not?

3) Assume you are put in charge of launching a new Web site for a local nonprofit organization. What costs would you need to account for? Make a list of expected costs and benefits for the project. You dont need to list values, just sources of expense. Consider both one-time and recurring costs.

4) Consider the situation you addressed in Problem and Exercise 3. Create numeric cost estimates for each of the costs you listed. Calculate the net present value and return on investment. Include a break-even analysis. Assume a 10 percent discount rate and a five-year time horizon.

5) Consider the situation you addressed in Problem and Exercise 3. Create a sample project scope statement, following the structure shown in Figure 4-13.

6) Assuming monetary benefits of an information system at $85,000 per year, one-time costs of $75,000, recurring costs of $35,000 per year, a discount rate of 12 percent, and a five-year time horizon, calculate the net present value of these costs and benefits of an information system. Also calculate the overall return on investment of the project and then present a break-even analysis. At what point does break-even occur?

7) Use the outline for the baseline project plan provided in Figure 4-12 to present the system specifications for the information system you chose for Problem and Exercise 3.

8) Change the discount rate for Problem and Exercise 6 to 10 percent and redo the analysis.

9) Change the recurring costs in Problem and Exercise 6 to $40,000 and redo the analysis.

10) Change the time horizon in Problem and Exercise 6 to three years and redo the analysis.

11) Assume monetary benefits of and information system of $40,000 the first year 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 systems life. The discount rate for the company was 11 percent. Using a six-year time horizon, calculate the net present value of these costs and benefits. Also, calculate the overall return on investment and then present a break-even analysis. At what point does break-even occur?

12) Change the discount rate for Problem and Exercise 11 to 12 percent and redo the analysis.

13) Change the recurring costs in Problem and Exercise 11 to $40,000 and redo the analysis.

14) For the system you chose for Problem and Exercise 3, complete section 1.0.A, the project overview, of the baseline project plan report. How important is it that this initial section of the baseline project plan report be done well? What could go wrong if this section is incomplete or incorrect?

Reference no: EM131135347

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