Q. Veridian Dynamics is a growing graphics design and printing firm, with 6 locations in rural southern Alberta, with on

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Q. Veridian Dynamics is a growing graphics design and printing
firm, with 6 locations in rural southern Alberta, with one acting
as the central office. Veridian designs and prints its graphics at
each office and has a couple of well-established suppliers for dyes
and products to be printed. The customer base is quite diverse, and
with increasing competition, Veridian is placing more emphasis on
responding to inquiries quickly, buying potential customer lists to
find new customers, and looking for ways to sell additional
products to each customer to improve revenue and profits. The
company is also in the process of converting its static web site so
that customers can enter order information online and contact staff
with questions about their orders. Each location currently sends
its accounting transactions to the central office by mail or email
for processing and financial reporting. Email is not always
reliable as the Internet connections are often slow and sometimes
stop functioning for a few hours at a time. There are three
bookkeeping staff at the central location, two of whom work
part-time. All three were involved in selection of the current
accounting system several years earlier and are very comfortable
with it. Veridian is considering moving to a public cloud-based
accounting system, as its current system is outdated, with both the
hardware and software in need of replacement. The cloud- based
solution is from a well-established company who provides services
nationally. The cloud-based system has some differences in the user
interface relative to the current system, but also expanded
functionality which means one of the current bookkeepers will
likely no longer be needed. Savings from eliminating one part-time
position are estimated at $15,000 per year for the second through
to fourth years. Multiple cloud tenants would be sharing the
software from the cloud services provider, though each tenant
(customer) would have access to only its own data. The cloud-based
system will cost $7,000 a year for the first 4 years, after which
Veridian can either extend its contract or choose a different
solution without penalty. Veridian will also need to buy seven
basic computers to access the cloud system in the first year, at a
cost of $700 each. Each location will be responsible for entering
its own transaction data, though the central office will handle
adjustments and financial reporting. Some additional training will
also be needed in the first year, at an estimated cost of $7,000.
If Veridian decides to buy the new version of its current software,
plus six new computers to run and access the software, it will cost
$10,000 in the first year for the computers and software, plus
annual maintenance costs of $1,000 a year for technical support. No
training will be needed. The hardware is expected to last for four
years before a replacement is needed. Veridian is unsure however if
the hardware and software will be capable of supporting the company
if current growth rates continue, given the increase in the volume
of transactions and increasing demands for more sophisticated
financial reporting.
a) Estimate the NPV of the two alternatives and indicate which
one you would recommend. Veridian is using a discount rate of 8%
given the risk of the two alternatives. You may assume all cash
flows occur at the end of the year specified. You can use either
Excel or a calculator to determine the NPVs, but please state your
inputs to get partial marks if your answer is incorrect.
b) Given the facts provided in the scenario, identify one risk
of each of the proposed solutions, and categorize them using the
categories provided in Chapter 12 of the Coursepack on P. 212.
Given these risks, would you change your answer in (a) above?
c) Given the information provided in the scenario, which of the
following types of systems should Veridian also consider acquiring:
ERP, SCM, or CRM? Briefly explain your answer. d) Comment on one
vulnerability of each of the two alternatives for the accounting
system, given the information provided in the scenario and using
the concepts discussed in Chapter 10 of the course pack on P. 173.
Provide at least one solution for each vulnerability you
identify.