Project Costs Initial estimates for project costs are given below. These costs are based on a specific solution option.

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Project Costs
Initial estimates for project costs are given below. These costs
are based on a specific solution option. Alternative options may be
considered as part of project Stage 1.
One-off hardware
Annual software cost
(Year 0 onwards)
Annual support (Year
1 onwards):
One-off
development
Annual data cost
(Middle of year 0 onwards)
Annual staff cost
(Year 1 onwards):
Project benefits
Initial estimates for project financial benefits are:
Increased sales
Reduced costs
Business Case
You are required to assess the financial viability of the
proposed project using the estimated costs and benefits given
above. Assume a discount rate of 5.5%. You must then recommend
whether to proceed with the project or not. You should consider how
critical the benefit estimate and discount rate values are to your
calculation. You might also want to make suggestions for how the
profitability of the project could be increased. Assume that the
product development takes place throughout the duration of project
Year 0. The system will “go live” at the start of Year 1 and is
expected to have a 7-year lifespan.
Calculate NPV