4. NPV Analysis Synergy is considering moving their data storage to a cloud-based solution. Their current costs of maint

[answerhappygod]

4 Npv Analysis Synergy Is Considering Moving Their Data Storage To A Cloud Based Solution Their Current Costs Of Maint 1 (71.83 KiB) Viewed 40 times

4. NPV Analysis Synergy is considering moving their data storage to a cloud-based solution. Their current costs of maintaining and upgrading their local servers for the next five years is estimated to be $175,000 per year, not including the salaries of the IT staff maintaining these servers. Additional information about the proposed investment are provided below. • The cost of moving to the cloud are $148,000 per year and an upfront cost of $300,000 for setup and training of current IT staff. The upfront cost is an expense and will not be depreciated but is tax deductible in the year that the expense is paid. • Moving to the cloud will allow Purposeful to let go of an IT staff member for a total savings of $97,000 per year. • Purposeful will be able to salvage their current server equipment for $19,000 after taxes have been paid on the sale. • The company evaluates projects based on a five-year useful life, using their traditional 8% discount rate, and tax rate of 19%. • Assume Purposeful is profitable in all years of the analysis and will pay taxes on any savings from the investment. A) Calculate the NPV of the proposed investment for moving to cloud storage. B) Calculate the IRR and payback period of the proposed investment for moving to cloud storage. C) Provide your recommendation on whether Synergy should move to the cloud. Consider and discuss what you believe are the two most important qualitative concerns and how this affects your decision. Your response should be about 4-6 sentences.