Piedmont trailer Case - Economic Feasibility Study

Sheet name
documentation
eco fea sum
one time cost
recurring cost
tangible benefits
discount rate
break even

t trailer Case - Economic Feasibility Study

Description
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 Costs
Associated 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 costs
Associated 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 benefits
associated 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 Worksheet
Net present value and Internal Rate of Return calculation
Discount Rate

0.14
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

0
1.000000

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

Overall Net Present Value

Cash Flow Analysis
Yearly NPV Cash Flow
Overall NPV Cash Flow

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

Internal Rate of Return

$(370,703.00)

$116,000.00

$116,000.00

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

ng Company
y Worksheet

Return calculation
Year
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

$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)

$60,246.77
$27,534.39

$116,000.00

$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 analysis

Discount 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 Analysis

Years
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
Row 4

$800,000.00
$600,000.00
$400,000.00
$200,000.00
$0

2
Year

s
4
$1,264,551.14
$1,297,263.51

5
$1,489,957.14
$1,462,422.75

Row 4

Row 5