Reference no: EM133295456
Consider the salary of IT positions as follows: Software Project Manager ($7,000 per month) Senior Programmer ($5,000 per month) Junior Programmer ($2,000 per month). A start-up plans to develop a mobile app that will allow users to see themselves in clothes found in ecommerce sites by the use of Augmented Reality (AR) technology. The start-up's founder has decided to manage the End of Semester 2, 2020 ISAD6000 Software Engineering Requirements and Specification Page 3 of 4 team himself and has hired one senior programmer and one junior programmer. He has laid out the financial projections as below: Year 0 Year 1 Year 2 Year 3 Year 4 Team salary costs $84,000 $84,000 0 0 0 Development costs $20,000 $10,000 0 0 0 Operation costs 0 0 $1,000 $1,000 $1,000 Maintenance costs 0 0 $1,000 $1,000 $1,000 Number of downloads 0 0 8,000 12,000 20,000 The app is a paid app and will cost $5 for a download. The founder estimates that after three years of operation, he will sell the business for $250,000.
(a) What is the payback period (to one decimal place) of the project? Show your working.
(b) What is the Net Present Value (NPV) of the project? Use a discount rate of 5%. Show your working.