Piedmont trailer Case - Economic Feasibility StudySheet name documentation eco fea sum one time cost recurring cost tangible benefits discount rate break even

t trailer Case - Economic Feasibility StudyDescription Documentation of the workbook. the economic feasibility of the project. the one-time costs and their approximate dollar values. the recurring costs and their approximate dollar values. the recurring benefits and their approximate dollar values. Analysis of different discount rates. when the project will break even (discount rate of 14%)

One-Time CostsAssociated Costs Development Personnel Training Project-Related Technology Purchases Site Preparation Miscellenous Conference-Related Supplies Duplication Total One-Time Costs Approximate Dollar Value $(142,000.00) $(45,000.00) $(65,000.00) $(105,250.00) $(7,500.00) $(2,704.00) $(3,249.00) $(370,703.00)

Recurring costsAssociated Costs Software Maintenance Hardware Supplies IT Positions (3 people) Site Rental Total Recurring Costs Approximate Dollar Value $(55,000.00) $(30,000.00) $(35,000.00) $(160,000.00) $(38,000.00) $(318,000.00)

recurring benefitsassociated benefits Storage Savings Staff Reduction Reduced Order Rework Increased Sales Faster Order Processing Better Data Management Streamline Activities Total Recurring Benefits Approximate Dollar Value $30,000.00 $45,000.00 $14,000.00 $100,000.00 $40,000.00 $125,000.00 $80,000.00 $434,000.00

Piedmont Trailer Manufacturing Company Economic Feasibility summary WorksheetNet present value and Internal Rate of Return calculationDiscount Rate 0 Benefits Recurring Value of Benefits Present Value Factor (PVF) Present Value of Benefits Sum of NPVs All Benefits Costs One-Time Costs Recurring Costs Present Value Factor Present Value of the recurring Costs Sum of NPVs All costs Overall Net Present Value Cash Flow Analysis Yearly NPV Cash Flow Overall NPV Cash Flow Internal Rate of Return 0 1.000000 0.14 1 $434,000.00 0.877193 $380,701.75 $380,701.75 2 $434,000.00 0.769468 $333,948.91 $714,650.66 Year 3 $434,000.00 0.674972 $292,937.64 $1,007,588.30

$(370,703.00) $(318,000.00) $(318,000.00) $(318,000.00) 0.877193 0.769468 0.674972 $(278,947.37) $(244,690.67) $(214,640.94) $(370,703.00) $(649,650.37) $(894,341.04) $(1,108,981.98) 1.000000

$(370,703.00) $101,754.39 $89,258.23 $(370,703.00) $(268,948.61) $(179,690.38) $(370,703.00) $116,000.00 $116,000.00

$78,296.70 $(101,393.68) $116,000.00

ng Company y WorksheetYear 4 $434,000.00 0.592080 $256,962.84 $1,264,551.14 5 $434,000.00 0.519369 $225,406.00 $1,489,957.14 Totals

Return calculation

$1,489,957.14

$(318,000.00) $(318,000.00) 0.592080 0.519369 $(188,281.53) $(165,159.24) $(1,297,263.51) $(1,462,422.75) $(1,462,422.75) $27,534.39

$68,681.31 $(32,712.37) $116,000.00

$60,246.77 $27,534.39 $116,000.00 17.049417%

Question IS#1 IS#2 IS#3 IS#4 IS#5

IS#6

Answer See sheet IS#1. See sheet IS#2. What do you think? I also asked this question on sheet IS#2. Change cell B7 in worksheet RecurringBenefits to =45000+32500 and see how it affects EFS sheet and IS#2 sheet. Keep changes from IS#4 and change cell B9 in worksheet 1XCosts to -120000 and see how it affects EFS and IS#2 sheets.

First, which one of the "scenarios" are we trying tompare to the other projects? Should we only look IRR to make the decision? If not, what other factors should we consider? If IRR is enough, justify your answer.

discount rate analysisDiscount Rate Project's Feasibility 0.08 $92,451.36 0.10 $69,028.27 0.12 $47,451.04 0.14 $27,534.39 0.16 $9,115.06

Break Even AnalysisYears 0 NPV of All Benefits NPV of All Costs $$370,703.00 1 $380,701.75 $649,650.37 2 $714,650.66 $894,341.04 3 $1,007,588.30 $1,108,981.98

Break Even Analysis$1,600,000.00 $1,400,000.00 $1,200,000.00 $1,000,000.00 $800,000.00 $600,000.00 $400,000.00 $200,000.00 $0 1 2 Year 3 4 Row 4

R

s 4 $1,264,551.14 $1,297,263.51 5 $1,489,957.14 $1,462,422.75

s

Row 4

Row 5

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