Consider that you have been assigned to create a website for your local non-profit.
There are several costs associated with the launch of a new website for a local non-profit organization. These include equipment purchase or leasing, equipment installation, hardware and other software.
It is expensive to purchase the equipment (webserver, cabling, software, installation) once.
There may be structural modifications required to the location where the server will live (electric outlets, lighting, cooling, heating, locking, etc.).
These possible structural changes are considered one-time expenditures.
These are the ongoing costs for maintaining and updating equipment and software, as well as renewing domain names and hiring the necessary personnel to accomplish these tasks.
Let’s say that the website implementation costs $50,000 one-time and that the ongoing costs are $10,000 each year.
The benefits of the website are $40,000 annually, with a 10% discount and a five year time horizon.
Next, follow these steps:1.
Calculate the net present and return on investments.2.
Include a Breakeven analysis3.
You can create a Project Scope Statement.
Answer to Question: MATH 33 Mathematics For Sustainability
Enjoy a Discount10%Project
Enjoy Discounted Prices$50,000$9,091$8,264$7,513$6,830$6,209$87,908
Get Discounted Benefits$0$36,364$33,058$30,053$27,321$24,837$151,631NPV$63,724i.e.
Total discounted costs = total discounted benefitsRoi
Get Discounted Benefits$151,631
Enjoy Discounted Costs($87,908)
ROI72%2.Break Even Analysis
Enjoy discounted benefits-costs($50,000)$27,273$24,793$22,539$20,490$18,628Cumulative benefits-costs($50,000)($22,727)$2,066$24,606$45,096$63,724
As you can see, the payback period for the above is between 4 and 5.
Years before your first positive cumulative Cash Flow +
(Absolute cash flow value for last negative cumulative cash flow)
Cash flow in year of the first positive cumulative cashflowTherefore,
Payback period =4.917
Which is roughly to5years
Therefore, the company will reach its financial goals in 5 years.
3.Project Scope Declaration
In the above scenario, it is your responsibility to launch a new website.
There might be multiple costs. Some may be one-time, while others may be ongoing.
Therefore, it is crucial to understand all costs and benefits so that they can be calculated accurately.
This scenario attempts to determine whether launching the product is financially feasible.
Robinson & Burnett (2016).
According to Kashiyap (2014), net present value is a positive number that indicates success.
To ensure that the project’s initial outflow is recovered or returned, the return on investment should be positive. Hayward et.al., 2016.
This is how the project’s benefits can be determined (Abor, 2017).
Analyse The Current Scenario
The net present worth of the project is $63,724, which makes it viable.
The ROI for the project is 72%. This makes it a good investment.
We can see that the initial cost can be recouped 5 years after it was started.
Managers must be involved in the project to ensure that there aren’t any negative effects.
Refer toAbor, J. Y. (2017).
Evaluating Capital Investment decisions: Capital Budgeting.
Entrepreneurial Finance: MSMEs (pp. 293-320).
Springer International Publishing.Burns, R., & Walker, J. (2015).
Capital budgeting surveys: The future lies now.Gotze, U., Northcott, D., & Schuster, P. (2015).
Capital Budgeting & Investment Decisions. In Investment Appraisal (pp. 3-26). Springer Berlin Heidelberg.Hayward, M., Caldwell, A., Steen, J., Gow, D., & Liesch, P. (2016).
Australian biotechnology firms provide evidence about entrepreneurs’ capital budgeting orientations and innovation outputs.
Long Range Planning.Kashyap, A. (2014).
Capital Allocation Decisions – Time Value of money.
Asian Journal of Management 5, 106-110.Robinson, C. J., & Burnett, J. R. (2016).
Financial Management Techniques: An Exploratory Analysis of Capital Budgeting Techniques In The Caribbean Region