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Cost-Benefit Analysis Of IT Proposal For Global Athletic Apparel Manufacturer
| TASK | A | M | B | ||
| Requirements | 20 | 30 | 39 | ||
| Prod. Specifications | 60 | 78 | 117 | ||
| Design & Implementation | |||||
| A | 68 | 135 | 270 | ||
| B | 135 | 225 | 451 | ||
| C | 176 | 351 | 702 | ||
| Integration Test | 35 | 105 | 158 | ||
| System Test | 18 | 70 | 176 | ||
| Reviews | |||||
| PDR | 9 | 18 | 35 | ||
| CDR | 9 | 18 | 35 | ||
| Manuals | |||||
| User | 53 | 70 | 140 | ||
| IMS | 53 | 70 | 140 | ||
| Delivery Package | 4 | 4 | 9 | ||
| Sub-Total | 638 | 1174 | 2271 | ||
| Project Management | 159 | 294 | 568 | ||
| TOTAL | |||||
| Standard Deviation | |||||
| Upper Limit of 90% Probability Range | |||||
| Lower Limit of 90% Probability Range | |||||
| Computation | Expected Time (Person Years) | ||||
| Expected Range | 14.3 | ||||
| Upper Limit | 16.0 | ||||
| Lower Limit | 12.5 | ||||
| Rate Tiers | |||||
| Units | Low | Medium | High | ||
| Architect/Designer | 32 | 48 | 79 | ||
| Developer | 24 | 32 | 48 | ||
| Testing Lead | 32 | 48 | 79 | ||
| Tester | 24 | 32 | 48 | ||
| Technical Writing Cost | 24 | 48 | 79 | ||
| Manager | 40 | 63 | 111 | ||
| On-site Manager | 95 | 158 | 238 | ||
| Cost Units | |||||
| Units | per hour | per days | |||
| Architect/Designer | 79 | 634 | |||
| Developer | 32 | 253 | |||
| Testing Lead | 32 | 254 | |||
| Tester | 48 | 380 | |||
| Technical Writing Cost | 48 | 380 | |||
| Manager | 40 | 317 | |||
| On-site Manager | 238 | 1902 | |||
| TOTAL | 4120 | ||||
| COSTS for IN-HOUSE DEVELOPMENT:- | |||||
| Fiscal Year | |||||
| COST ITEMS | 2018 | 2019 | 2020 | 2021 | 2022 |
| Hardware | $3,76,826 | $3,48,564 | $3,48,564 | ||
| Software | $2,78,851 | $2,09,138 | $2,09,138 | ||
| Project Team Salary | $3,76,826 | $3,20,302 | $2,72,257 | ||
| Telecommunications | $4,18,277 | $4,49,648 | $4,94,612 | ||
| Training | $2,09,138 | $2,09,138 | $2,09,138 | ||
| Operations & Contingencies | $4,18,277 | $4,18,277 | $4,18,277 | ||
| Project Total Cost by Year | $7,95,103 | $7,66,841 | $20,49,933 | $11,88,226 | $11,85,146 |
| PROJECT TOTAL COST | $59,85,248 | ||||
| BENEFITS of IN-HOUSE DEVELOPMENT:- | |||||
| Fiscal Year | |||||
| BENEFIT SOURCES | 2018 | 2019 | 2020 | 2021 | 2022 |
| Cost Reduction (Courier & Returned Goods) | $6,97,128 | $7,31,984 | $7,66,841 | ||
| Enhanced Revenues | $3,48,564 | $4,87,990 | $6,83,185.38 | ||
| Decreased Employee Overtime | $1,39,426 | $1,39,426 | |||
| Decreased Overhead | $69,713 | $69,713 | $69,713 | ||
| Total Benefits Per Year | $0 | $0 | $11,15,405 | $14,29,112 | $16,59,165 |
| Confidence Factor | 99.7% | 99.7% | 99.7% | 99.7% | 99.7% |
| Benefits Claim for Analysis | $0 | $0 | $11,12,058 | $14,24,825 | $16,54,187 |
| PROJECT GRAND TOTAL BENEFIT | $41,91,070 | ||||
| COST BENEFIT ANALYSIS (IN-HOUSE) :- | |||||
| Fiscal year | |||||
| 2018 | 2019 | 2020 | 2021 | 2022 | |
| UNDISCOUNTED CASH FLOWS | |||||
| Costs | $7,95,103 | $7,66,841 | $20,49,933 | $11,88,226 | $11,85,146 |
| Benefits | $0 | $0 | $11,12,058 | $14,24,825 | $16,54,187 |
| Net Cash Flows | -$7,95,103 | -$7,66,841 | -$9,37,874 | $2,36,599 | $4,69,041 |
| DISCOUNT FACTOR | |||||
| Discount Rate | 8.00% | ||||
| Base Year | 2018 | ||||
| Year Index | 0 | 1 | 2 | 3 | 4 |
| Discount Factor | 1.000 | 0.9259 | 0.8573 | 0.7938 | 0.7350 |
| Discounted Flows | |||||
| Costs | -$7,95,103 | -$7,10,038 | -$17,57,487 | -$9,43,252 | -$8,71,118 |
| Benefits | $0 | $0 | $9,53,411 | $11,31,072 | $12,15,877 |
| Net | -$7,95,103 | -$7,10,038 | -$8,04,076 | $1,87,820 | $3,44,759 |
| Cumulative Cash Flow | -$7,95,103 | -$15,05,140 | -$23,09,217 | -$21,21,397 | -$17,76,638 |
| Net Present Value | -$17,76,637.66 | ||||
| Internal Rate of Return | -40% | ||||
| Reference List |
| Wu, J., Al-Khateeb, F. B., Teng, J. T., & Cárdenas-Barrón, L. E. (2016). Inventory models for deteriorating items with maximum lifetime under downstream partial trade credits to credit-risk customers by discounted cash-flow analysis. International Journal of Production Economics, 171, 105-115. |
| Chen, S. C., & Teng, J. T. (2015). Inventory and credit decisions for time-varying deteriorating items with up-stream and down-stream trade credit financing by discounted cash flow analysis. European Journal of Operational Research, 243(2), 566-575. |
| Lefley, F. (2015). The FAP Model—The Net Present Value Profile (NPVP). In The FAP Model and Its Application in the Appraisal of ICT Projects (pp. 100-112). Palgrave Macmillan, London. |
| Leyman, P., & Vanhoucke, M. (2016). Payment models and net present value optimization for resource-constrained project scheduling. Computers & Industrial Engineering, 91, 139-153. |
| Veldman, E., & Verzijlbergh, R. A. (2015). Distribution grid impacts of smart electric vehicle charging from different perspectives. IEEE Transactions on Smart Grid, 6(1), 333-342. |
| Benamraoui, A., Jory, S. R., Boojihawon, D. R., & Madichie, N. O. (2017). Net Present Value Analysis and the Wealth Creation Process: A Case Illustration. The Accounting Educators’ Journal, 26. |
| Bibliography |
| Götze, U., Northcott, D., & Schuster, P. (2015). Investment appraisal: methods and models. Springer. |
| Lee, I., & Lee, K. (2015). The Internet of Things (IoT): Applications, investments, and challenges for enterprises. Business Horizons, 58(4), 431-440. |