Course objective: Define an effective requirements process for a project
Instructions:
• Answer the following questions for this week’s homework assignment.
• Use Microsoft Excel (required).
• All work must be completed by the due date.
• Place all responses on one document (one file different tabs in Excel). **ALL CELLS MUST HAVE FORMULAS- NO FORMULAS NO POINTS AWARDED***
• Show work for all questions (within Excel)
Exercises (located on page 50 & 51 of the course book):
1. Two new software projects are proposed to a young, start-up company. The Alpha project will cost $150,000 to develop and is expected to have annual net cash flow of $40,000. The Beta project will cost $200,000 to develop and is expected to have annual net cash flow of $50,000. The company is very concerned about their cash flow. Using the payback period, which project is better from a cash flow standpoint? Why?
2. A five-year project has a projected net cash flow of $15,000, $25,000, $30,000, $20,000, and $15,000 in the next five years. It will cost $50,000 to implement the project. If the required rate of return is 20 percent, conduct a discounted cash flow calculation to determine the NPV.
3. You work for the 3T company, which expects to earn at least 18 percent on its investments. You have to choose between two similar projects. Your analysts predict that inflation rate will be a stable 3 percent over the next 7 years. Below is the cash flow information for each project. Which of the two projects would you fund if the decision is based only on financial information? Why?
4. Plagiarism attempts will be shared with academics and placed in student academic file.
Rubric:
Please review the grading rubric provided before submitting your work for evaluation.
Your submittal should be labeled as followed: lastnameweek2.docx or lastnameweek2.xlsx
Helpful Links:
Caluclating payback in Excel:
Calculating NPV:
New to Excel? Use this tutorial to get started: