separate solution please for a and b. Thank you SYSTEMS SELECTIONYour company, Kitchen Works, is employing the SDLC for its new information system. The company iscurrently performing a number of feasibility studies, including the economic feasibility study. A draft ofthe economic feasibility study has been presented to you for your review. You have been charged withdetermining whether only escapable costs have been used, the present value of cash flow is accurate,the one-time and recurring costs are correct, realistic useful lives have been used, and the intangiblebenefits listed in the study are reasonable. Although you are a member of the development teambecause of your strong accounting background, you have questions about whether some costs areescapable, the interest rates used to perform present value analysis, and the estimated useful lives thathave been used. How might you resolve your questions?COST-BENEFIT ANALYSISCost of Capital = .14Design ADesign BProject-Completion time24 months24 monthsExpected Useful Life6 years6 yearsOne-time Cost750,000720,000Recurring Cost275,000295,000Tangible Benefits| 693,000675,000a. Compute the net present value of each alternativeb. Compute for payback period. Initial Investment = 1,000,000Payback Period = Initial Investment/Annual Cash Inflowc. Which method do you think provides the best source of information? Why?

Net Present Value=(Present Value of Cash Inflows-Present Value of Cash Outflows) Payback…

COST-BENEFIT ANALYSIS Cost of Capital = .14 Design A Design B Project-Completion time 24 months 24 months Expected Useful Life 6 years 6 years One-time Cost 750,000 720,000 Recurring Cost 275,000 295,000 Tangible Benefits 693,000 675,000 a. Compute the net present value of each alternative b. Compute for payback period. Initial Investment = 1,000,000 Payback Period = Initial Investment/Annual Cash Inflow c. Which method do you think provides the best source of information? Why?

COST-BENEFIT ANALYSIS Cost of Capital = .14 Design A Design B Project-Completion time 24 months 24 months Expected Useful Life 6 years 6 years One-time Cost 750,000 720,000 Recurring Cost 275,000 295,000 Tangible Benefits 693,000 675,000 a. Compute the net present value of each alternative b. Compute for payback period. Initial Investment = 1,000,000 Payback Period = Initial Investment/Annual Cash Inflow c. Which method do you think provides the best source of information? Why?

Accounting Information Systems

10th Edition

ISBN:9781337619202

Author:Hall, James A.

Publisher:Hall, James A.

Chapter13: Systems Development And Program Change Activities

Section: Chapter Questions

Problem 7P: SYSTEMS SELECTION Your company. Kitchen Works, is employing the SDLC for its new information system....

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