Devry Work Sheet

of Essentials Systems Analysis and Design, 3rd Ed. (by Valacich, George & Hoffer) Ch 3: Pine Valley Furniture Case Exercises Solutions A . How were Pine Valley Furniture's projects initiated? What is the focus for each of the new systems? Jackie Judson, PVF's vice-president of Marketing, submitted a Systems Service Request, requesting the development of a Customer Tracking System. The Customer Tracking System's focus is primarily tactical. PVF's board of directors initiated the WebStore project. The WebStore has more of a strategic focus. b. Modify the Customer Tracking System's economic feasibility analysis to reflect the modifications mentioned in the case scenario. Use a discount rate of 10 percent. After the changes are made, what are the new overall NPV, ROI, and BEP? A suggested answer is provided below. Chapter 3, PVF #2 Year 0 Net Economic Benefit Discount Rate (.10) PV of Benefits NPV of all Benefits One-Time Costs Recurring Costs Discount Rate (.10) PV of Recurring Costs NPV of all Costs Overall NPV Overall ROI Break-even Analysis Yearly NPV Cash Flow Overall NPV Cash Flow Project Break-even occurs between years 1 and 2 Use first year of positive cash flow to calculate break-even fraction Actual Break-even occurs at 2.46 years 0.461 0.10 0.10 $0 1.0000 $0 $0 $47,500 $0 1.0000 $0 $47,500 $30,000 0.9091 $27,273 $74,772.73 $30,000 0.8264 $24,793 $99,566 $30,000 0.7513 $22,539 $122,106 $30,000 0.6830 $20,490 $142,596 $30,000 0.6209 $18,628 $161,224 $161,224 $49,244 0.31 Year 1 $50,000 0.909091 $45,455 $45,455 Year 2 $55,000 0.826446 $45,455 $90,909 Year 3 $55,000 0.751315 $41,322 $132,231 Year 4 $60,000 0.683013 $40,981 $173,212 Year 5 $60,000 0.620921 $37,255 $210,467 $210,467 Totals $47,500 ($47,500) $18,182 ($29,318) $20,661 ($8,657) $18,783 $10,126 $20,490 $30,616 $18,628 $49,244

Chapter 3, PVF #3 14 Percent Year 0 Net Economic Benefit Discount Rate (.14) PV of Benefits NPV of all Benefits One-Time Costs Recurring Costs Discount Rate (.14) PV of...