Chapter 14 Running Case Assignment: Improving Decision Making:Using
Spreadsheet Software to Analyze the Return on a New SystemInvestment
Software skills: Spreadsheet formulas and functions
Business skills: Capital budgeting
This project provides you with an opportunity to use spreadsheetsoftware to use the
capital budgeting models discussed in this chapter to analyzethe return on a new
information system investment for a real-world company.
Dirt Bikesâs management would like to analyze the return on itsinvestment in its
employee training and skills tracking system described inChapter 13. The system runs on
the human resources specialistsâ PCs using PC database software.Because the entire
corporate administrative staff recently received new desktop PCsystems with database
and other productivity software, there are no additionalhardware and software purchase
costs. The main costs include the initial cost of designing andimplementing the database
(business staff cost of $5,000; information systems staff costof $15,000), gathering and
adding employee skills and training data to the database ($5,500initial data conversion
cost plus $1,000 annual data entry costs), and ongoingmaintenance and support ($3,000
annually). Human resources staff members believe the newapplication could save each
of them two hours of work per week. (Their annual salaries are$37,000 and $42,000
each.) The company would also save about $11,000 annually inemployee recruiting costs
because it would be able to fill many vacant positions withexisting employees, thereby
reducing its costs for recruiting outside the company. Thesystem would not be installed
until the end of 2014 and would return benefits from 2015 to2019.
ï· Prepare a business report for management analyzing the returnon the investment
for this system over a five-year period using the followingcapital budgeting
models: net present value, return on investment (ROI), internalrate of return
(IRR), and payback method. Assume a 5 percent interest rate foryour net present
value calculations. Use spreadsheet software for yourcalculations. 40 hours working per week
Chapter 14 Running Case Assignment: Improving Decision Making:Using
Spreadsheet Software to Analyze the Return on a New SystemInvestment
Software skills: Spreadsheet formulas and functions
Business skills: Capital budgeting
This project provides you with an opportunity to use spreadsheetsoftware to use the
capital budgeting models discussed in this chapter to analyzethe return on a new
information system investment for a real-world company.
Dirt Bikesâs management would like to analyze the return on itsinvestment in its
employee training and skills tracking system described inChapter 13. The system runs on
the human resources specialistsâ PCs using PC database software.Because the entire
corporate administrative staff recently received new desktop PCsystems with database
and other productivity software, there are no additionalhardware and software purchase
costs. The main costs include the initial cost of designing andimplementing the database
(business staff cost of $5,000; information systems staff costof $15,000), gathering and
adding employee skills and training data to the database ($5,500initial data conversion
cost plus $1,000 annual data entry costs), and ongoingmaintenance and support ($3,000
annually). Human resources staff members believe the newapplication could save each
of them two hours of work per week. (Their annual salaries are$37,000 and $42,000
each.) The company would also save about $11,000 annually inemployee recruiting costs
because it would be able to fill many vacant positions withexisting employees, thereby
reducing its costs for recruiting outside the company. Thesystem would not be installed
until the end of 2014 and would return benefits from 2015 to2019.
ï· Prepare a business report for management analyzing the returnon the investment
for this system over a five-year period using the followingcapital budgeting
models: net present value, return on investment (ROI), internalrate of return
(IRR), and payback method. Assume a 5 percent interest rate foryour net present
value calculations. Use spreadsheet software for yourcalculations. 40 hours working per week
