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 5-year time horizon, calculate the net present value (NPV) of the system’s costs and benefits. Also calculate the overall return on investment (ROI) of the project and then present a break-even analysis (BEA). At what point does break-even occur?
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 5-year time horizon, calculate the
Net present value (NPV) is a financial calculation that helps determine the value of an investment by comparing the expected costs of the investment against the expected benefits of the investment, both in today's dollars. NPV takes into account the time value of money, which means that a dollar received in the future is worth less than a dollar received today due to inflation and the opportunity cost of not having that dollar to invest elsewhere.
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