Assignment 3: Time Value of Money Calculations

The IT department has requested an update in its server population. This upgrade is required to maintain a competitive position. The CEO has asked that you evaluate the project and submit a recommendation to her, in terms of whether the company should move forward with this request. The calculated value of the project is a reduction of expenses, including power and replacement costs, as shown in Table-1:

Year

Decrease in Expenses

1$30,000.00

2$100,000.00

3$120,000.00

4$100,000.00

5$30,000.00

Assume the impact after five years to be immeasurable.  The cost of capital to the firm is currently 8% and the cost of the project today is $286,000.

Required:

• Calculate the net present value of the project
• Calculate the internal rate of return
• Calculate the payback period
• Calculate the discounted payback period

Submit an Excel file with your calculations, and a 2-to-5-page paper that explains the calculations and provides your final assessment and decision. Justify your recommendations. The paper must be submitted as a Word document and it must follow APA style guidelines