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Date Created: November 22, 2018
Purpose: The Economic Feasiblity Workbook tracks the benefits and costs associated
with Piedmont's new custom order tracking system.
Worksheets: Documentation Documents the workbook.
Economic Feasibility Summary Summarizes the economic feasibility for the project.
One-Time Costs Identifies the one-time costs and their approximate dollar values.
Recurring Costs Identifies the recurring costs and their approximate dollar values.
Recurring Benefits Identifies the recurring benefits and their approximate dollar values.
Piedmont Trailer Manufacturing Company
Custom Order Tracking Project
Economic Feasibility Summary
November 22, 2018
Discount Rate 0.14
Year
0 1 2 3 4 5
Benefits
Recurring Value of Benefits $0 $434,000.00 $434,000.00 $434,000.00 $434,000.00 $434,000.00
Present Value Factor 1.000000 0.877193 0.769468 0.674972 0.592080 0.519369
Present Value of Benefits $0 $380,702 $333,949 $292,938 $256,963 $225,406
Net Present Value of All Benefits $0 $380,701.75 $714,650.66 $1,007,588.30 $1,264,551.14 $1,489,957.14
Costs
One-Time Costs (370,703.00)
Recurring Costs (318,000.00) (318,000.00) (318,000.00) (318,000.00) (318,000.00)
Present Value Factor 1.000000 0.877193 0.769468 0.674972 0.592080 0.519369
Present Value of the Recurring Costs (278,947.37) (244,690.67) (214,640.94) (188,281.53) (165,159.24)
Net Present Value of All Costs (370,703.00) (649,650.37) (894,341.04) (1,108,981.98) (1,297,263.51) (1,462,422.75)
Overall Net Present Value $370,703.00 $268,948.61 $179,690.38 $101,393.68 $32,712.37 $27,534.39
$1,489,957.14
(1,462,422.75)
$27,534.39
0.5429730981
17.049417%
Solution 1:
Year
Cash Flow Analysis 0 1 2 3
3 years: Yearly NPV Cash Flow -370703 101754.4 89258.23 78296.7
Overall NPV Cash Flow -370703 -268949 -179690 -101394
As we can see, we are not able to achieve break even in 3 years as the overall
cashflow is still negative at the end of 3rd year
Year
It is clear that we have already achieved the break even well before 6th year, precisely at 4.54 years, hence
project is feasible
Solution 3:
Recurring Costs
IRR: -20.398%
After making the changes i.e after adding one one-time cost and three recurring costs we have got the
break even till 5th year and also IRR in this case is less compared to discount rate hence we can commen
our client to not account these costs for keeping the project feasible.
Solution 3:
One time cost
cost and three recurring costs we have got the above overall cash flow which shows that we have not attained the
mpared to discount rate hence we can comment that the project will no longer be feasible and hence we can recommend
Solution 1:
$400,000.00
$200,000.00
$0.00
$0.00 $1.00 $2
Solution 3:
As long as the IRR is greater than or equal to disount rate, project will be feasilble
Solution 5:
As far as feasiblity part is concerned we can easily see that break even improves, provided we have also red
Solution 2:
Breakeven Analysis
Years 0 1 2 3 4 5
Net Present Value of All Benefits 0 380701.8 714650.7 1007588 1264551 1489957
Net Present Value of All Costs 370703 649650.4 894341 1108982 1297264 1462423
$1,600,000.00
$1,400,000.00
$1,200,000.00
$1,000,000.00
$800,000.00
$600,000.00
$400,000.00
$200,000.00
$0.00
$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00
Solution 4:
After reducing recurring cost by $32500, we can deduce that break even improves
318000
Piedmont Trailer Manufacturing Company
Custom Order Tracking Project
Recurring Benefits
November 22, 2018
Benefit Approximate Dollar Value
Storage Savings $30,000.00
Staff Reduction (2 people) $45,000.00
Reduced Order Rework $14,000.00
Increased Sales $100,000.00
Faster Order Processing $40,000.00
Better Data Management $125,000.00
Streamline Activities $80,000.00
Total Recurring Benefits $434,000.00
Piedmont Trailer Manufacturing Company
Custom Order Tracking Project
Breakeven Analysis
November 22, 2018
Years
0.00 1.00 2.00 3.00 4.00 5.00
Net Present Value of All Benefits $0.00 $380,701.75 $714,650.66 $1,007,588.30 $1,264,551.14 $1,489,957.14
Net Present Value of All Costs 370,703.00 649,650.37 894,341.04 1,108,981.98 1,297,263.51 1,462,422.75
$1,600,000.00
$1,400,000.00
$1,200,000.00
$1,000,000.00
$800,000.00
$600,000.00
$400,000.00
$200,000.00
$0.00
$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00
NAMES and ROLL Nos:
CASE SCENERIO
PROBLEM STATEMENT
OBJECTIVES (REQUIREMENTS)
INFORMATION AVAILABLE
1. Cell referencing
a) Solutions
b) Test Your Design Solutions
Costs
One-Time Costs (370,703.00)
Recurring Costs (318,000.00) (318,000.00) (318,000.00) (318,000.00) (318,000.00)
Present Value Factor 1.000000 0.833333 0.694444 0.578704 0.482253 0.401878
Present Value of the Recurring Costs (265,000.00) (220,833.33) (184,027.78) (153,356.48) (127,797.07)
Net Present Value of All Costs (370,703.00) (635,703.00) (856,536.33) (1,040,564.11) (1,193,920.59) (1,321,717.66)
Overall Net Present Value $370,703.00 $274,036.33 $193,480.78 $126,351.15 $70,409.79 $23,791.99
$1,297,925.67
(1,321,717.66)
($23,791.99)
1.5103628359
17.049417%
Piedmont Trailer Manufacturing Company
Custom Order Tracking Project
Economic Feasibility Summary
November 22, 2018
Discount Rate 0.14
Year
0 1 2 3 4 5
Benefits
Recurring Value of Benefits $0 $434,000.00 $434,000.00 $434,000.00 $434,000.00 $434,000.00
Present Value Factor 1.000000 0.877193 0.769468 0.674972 0.592080 0.519369
Present Value of Benefits $0 $380,702 $333,949 $292,938 $256,963 $225,406
Net Present Value of All Benefits $0 $380,701.75 $714,650.66 $1,007,588.30 $1,264,551.14 $1,489,957.14
Costs
One-Time Costs (370,703.00)
Recurring Costs (318,000.00) (318,000.00) (318,000.00) (318,000.00) (318,000.00)
Present Value Factor 1.000000 0.877193 0.769468 0.674972 0.592080 0.519369
Present Value of the Recurring Costs (278,947.37) (244,690.67) (214,640.94) (188,281.53) (165,159.24)
Net Present Value of All Costs (370,703.00) (649,650.37) (894,341.04) (1,108,981.98) (1,297,263.51) (1,462,422.75)
Overall Net Present Value $370,703.00 $268,948.61 $179,690.38 $101,393.68 $32,712.37 $27,534.39
$1,489,957.14
(1,462,422.75)
$27,534.39
0.5429730981
17.049417%