The IT department has requested an update in its server population. This upgrade is required to maintain a competitive position. The CEO has asked that you evaluate the project and submit a recommendation to her, in terms of whether the company should move forward with this request. The calculated value of the project is a reduction of expenses, including power and replacement costs, as shown in Table-1:
Year |
Decrease in Expenses |
1 | $30,000.00 |
2 | $100,000.00 |
3 | $120,000.00 |
4 | $100,000.00 |
5 | $30,000.00 |
Assume the impact after five years to be immeasurable. The cost of capital to the firm is currently 8% and the cost of the project today is $286,000.
Required:
- Calculate the net present value of the project
- Calculate the internal rate of return
- Calculate the payback period
- Calculate the discounted payback period
Submit an Excel file with your calculations, and a 2-to-5-page paper that explains the calculations and provides your final assessment and decision. Justify your recommendations. The paper must be submitted as a Word document and it must follow APA style guidelines.