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Piedmont Trailer Manufacturing Company

Custom Order Tracking Project


Recurring Benefits
November 2, 2015
Benefit
Storage Savings
Staff Reduction (2 people)
Reduced Order Rework
Increased Sales
Faster Order Processing
Better Data Management
Streamline Activities
Total Recurring Benefits

Approximate
Dollar Value
$30,000.00
$45,000.00
$14,000.00
$100,000.00
$40,000.00
$125,000.00
$80,000.00
$434,000.00

Piedmont Trailer Manufacturing Company


Custom Order Tracking Project
One-Time Costs
November 2, 2015
Cost
Development Personnel
Training
Project-Related Technology Purchases
Site Preparation
Miscellaneous
Conference-Related
Supplies
Duplication
Total One-Time Costs

Approximate
Dollar Value
(142,000.00)
(45,000.00)
(65,000.00)
(105,250.00)
(7,500.00)
(2,704.00)
(3,249.00)
(370,703.00)

Piedmont Trailer Manufacturing Company


Custom Order Tracking Project
Recurring Costs
November 2, 2015
Cost
Software Maintenance
Hardware
Supplies
IT Positions (3 people)
Site Rental
Total Recurring Costs

Approximate
Dollar Value
($55,000.00)
($30,000.00)
($35,000.00)
($160,000.00)
($38,000.00)
($318,000.00)

Piedmont Trailer Manufacturing Company


Custom Order Tracking Project
Economic Feasibility Summary
November 2, 2015
Discount Rate

14%
Year

Year
Benefits
Recurring Value of Benefits
Present Value Factor
Present Value of Benefits
Net Present Value of All Benefits

$0
1.000000
$0.00
$0.00

$434,000.00
0.877193
$380,701.75
$380,701.75

$434,000.00
0.769468
$333,948.91
$714,650.66

$434,000.00
0.674972
$292,937.64
$1,007,588.30

$434,000.00
0.592080
$256,962.84
$1,264,551.14

$434,000.00
0.519369
$225,406.00
$1,489,957.14

(370,703.00)
0.00
1.000000
0.00
(370,703.00)

(318,000.00)
0.877193
(278,947.37)
(649,650.37)

(318,000.00)
0.769468
(244,690.67)
(894,341.04)

(318,000.00)
0.674972
(214,640.94)
(1,108,981.98)

(318,000.00)
0.592080
(188,281.53)
(1,297,263.51)

(318,000.00)
0.519369
(165,159.24)
(1,462,422.75)

Cash Flow Analysis


Yearly NPV Cash Flow
Overall NPV Cash Flow

(370,703.00)
(370,703.00)

101,754.39
(268,948.61)

89,258.23
(179,690.38)

78,296.70
(101,393.68)

68,681.31
(32,712.37)

60,246.77
27,534.39

IRR:

(370,703.00)

116,000.00

116,000.00

116,000.00

116,000.00

116,000.00

Costs
One-Time Costs
Recurring Costs
Present Value Factor
Present Value of Recurring Costs
Net Present Value of All Costs
Overall Net Present Value

Break-even Occurs Between:

Years 4 and 5

Totals

$1,489,957.14

(1,462,422.75)
$27,534.39

17.049417%

Piedmont Trailer Manufacturing Company


Custom Order Tracking Project
Economic Feasibility Summary
November 2, 2015
Discount Rate

8%
Year

Year
Benefits
Recurring Value of Benefits
Present Value Factor
Present Value of Benefits
Net Present Value of All Benefits

$0
1.000000
$0.00
$0.00

$434,000.00
0.925926
$401,851.85
$401,851.85

$434,000.00
0.857339
$372,085.05
$773,936.90

$434,000.00
0.793832
$344,523.19
$1,118,460.09

$434,000.00
0.735030
$319,002.96
$1,437,463.05

$434,000.00
0.680583
$295,373.11
$1,732,836.16

(370,703.00)
0.00
1.000000
0.00
(370,703.00)

(318,000.00)
0.925926
(294,444.44)
(665,147.44)

(318,000.00)
0.857339
(272,633.74)
(937,781.19)

(318,000.00)
0.793832
(252,438.65)
(1,190,219.84)

(318,000.00)
0.735030
(233,739.49)
(1,423,959.34)

(318,000.00)
0.680583
(216,425.46)
(1,640,384.79)

Cash Flow Analysis


Yearly NPV Cash Flow
Overall NPV Cash Flow

(370,703.00)
(370,703.00)

107,407.41
(263,295.59)

99,451.30
(163,844.29)

92,084.54
(71,759.75)

85,263.46
13,503.71

78,947.65
92,451.36

IRR:

(370,703.00)

116,000.00

116,000.00

116,000.00

116,000.00

116,000.00

Costs
One-Time Costs
Recurring Costs
Present Value Factor
Present Value of Recurring Costs
Net Present Value of All Costs
Overall Net Present Value

Break-even Occurs Between:

Years 4 and 5

Totals

$1,732,836.16

(1,640,384.79)
$92,451.36

17.049417%

Piedmont Trailer Manufacturing Company


Custom Order Tracking Project
Economic Feasibility Summary
November 2, 2015
Discount Rate

10%
Year

Year
Benefits
Recurring Value of Benefits
Present Value Factor
Present Value of Benefits
Net Present Value of All Benefits

$0
1.000000
$0.00
$0.00

$434,000.00
0.909091
$394,545.45
$394,545.45

$434,000.00
0.826446
$358,677.69
$753,223.14

$434,000.00
0.751315
$326,070.62
$1,079,293.76

$434,000.00
0.683013
$296,427.84
$1,375,721.60

$434,000.00
0.620921
$269,479.85
$1,645,201.46

(370,703.00)
0.00
1.000000
0.00
(370,703.00)

(318,000.00)
0.909091
(289,090.91)
(659,793.91)

(318,000.00)
0.826446
(262,809.92)
(922,603.83)

(318,000.00)
0.751315
(238,918.11)
(1,161,521.93)

(318,000.00)
0.683013
(217,198.28)
(1,378,720.21)

(318,000.00)
0.620921
(197,452.98)
(1,576,173.19)

Cash Flow Analysis


Yearly NPV Cash Flow
Overall NPV Cash Flow

(370,703.00)
(370,703.00)

105,454.55
(265,248.45)

95,867.77
(169,380.69)

87,152.52
(82,228.17)

79,229.56
(2,998.61)

72,026.87
69,028.27

IRR:

(370,703.00)

116,000.00

116,000.00

116,000.00

116,000.00

116,000.00

Costs
One-Time Costs
Recurring Costs
Present Value Factor
Present Value of Recurring Costs
Net Present Value of All Costs
Overall Net Present Value

Break-even Occurs Between:

Years 4 and 5

Totals

$1,645,201.46

(1,576,173.19)
$69,028.27

17.049417%

Piedmont Trailer Manufacturing Company


Custom Order Tracking Project
Economic Feasibility Summary
November 2, 2015
Discount Rate

12%
Year

Year
Benefits
Recurring Value of Benefits
Present Value Factor
Present Value of Benefits
Net Present Value of All Benefits

$0
1.000000
$0.00
$0.00

$434,000.00
0.892857
$387,500.00
$387,500.00

$434,000.00
0.797194
$345,982.14
$733,482.14

$434,000.00
0.711780
$308,912.63
$1,042,394.77

$434,000.00
0.635518
$275,814.85
$1,318,209.62

$434,000.00
0.567427
$246,263.26
$1,564,472.87

(370,703.00)
0.00
1.000000
0.00
(370,703.00)

(318,000.00)
0.892857
(283,928.57)
(654,631.57)

(318,000.00)
0.797194
(253,507.65)
(908,139.22)

(318,000.00)
0.711780
(226,346.12)
(1,134,485.34)

(318,000.00)
0.635518
(202,094.75)
(1,336,580.09)

(318,000.00)
0.567427
(180,441.74)
(1,517,021.83)

Cash Flow Analysis


Yearly NPV Cash Flow
Overall NPV Cash Flow

(370,703.00)
(370,703.00)

103,571.43
(267,131.57)

92,474.49
(174,657.08)

82,566.51
(92,090.57)

73,720.10
(18,370.48)

65,821.52
47,451.04

IRR:

(370,703.00)

116,000.00

116,000.00

116,000.00

116,000.00

116,000.00

Costs
One-Time Costs
Recurring Costs
Present Value Factor
Present Value of Recurring Costs
Net Present Value of All Costs
Overall Net Present Value

Break-even Occurs Between:

Years 4 and 5

Totals

$1,564,472.87

(1,517,021.83)
$47,451.04

17.049417%

Piedmont Trailer Manufacturing Company


Custom Order Tracking Project
Economic Feasibility Summary
November 2, 2015
Discount Rate

16%
Year

Year
Benefits
Recurring Value of Benefits
Present Value Factor
Present Value of Benefits
Net Present Value of All Benefits

$0
1.000000
$0.00
$0.00

$434,000.00
0.862069
$374,137.93
$374,137.93

$434,000.00
0.743163
$322,532.70
$696,670.63

$434,000.00
0.640658
$278,045.43
$974,716.06

$434,000.00
0.552291
$239,694.34
$1,214,410.40

$434,000.00
0.476113
$206,633.05
$1,421,043.45

(370,703.00)
0.00
1.000000
0.00
(370,703.00)

(318,000.00)
0.862069
(274,137.93)
(644,840.93)

(318,000.00)
0.743163
(236,325.80)
(881,166.73)

(318,000.00)
0.640658
(203,729.14)
(1,084,895.87)

(318,000.00)
0.552291
(175,628.57)
(1,260,524.44)

(318,000.00)
0.476113
(151,403.94)
(1,411,928.38)

Cash Flow Analysis


Yearly NPV Cash Flow
Overall NPV Cash Flow

(370,703.00)
(370,703.00)

100,000.00
(270,703.00)

86,206.90
(184,496.10)

74,316.29
(110,179.81)

64,065.77
(46,114.05)

55,229.11
9,115.06

IRR:

(370,703.00)

116,000.00

116,000.00

116,000.00

116,000.00

116,000.00

Costs
One-Time Costs
Recurring Costs
Present Value Factor
Present Value of Recurring Costs
Net Present Value of All Costs
Overall Net Present Value

Break-even Occurs Between:

Years 4 and 5

Totals

$1,421,043.45

(1,411,928.38)
$9,115.06

17.049417%

Years
0
Net Present Value of All Benefits
Net Present Value of All Costs

$0.00
$ 370,703.00

1
$ 380,701.75
$ 649,650.37

2
3
$ 714,650.66 $ 1,007,588.30
$ 894,341.04 $ 1,108,981.98

$1,600,000.00
$1,400,000.00
$1,200,000.00
$1,000,000.00

Net Present Value


of All Benefits

$800,000.00
$600,000.00

Net Present Value


of All Costs

$400,000.00
$200,000.00
$0.00
0

2
3
Years

4
5
$ 1,264,551.14 $ 1,489,957.14
$ 1,297,263.51 $ 1,462,422.75

The discount rate is 14% and the internal rate of return is 17%. The project is justifiable because 17% is greater than 14%.
I added the IRR to Economic Feasibility Worsheet to f=get this answer

17% is greater than 14%.

Piedmont Trailer Manufacturing Company


Custom Order Tracking Project
Recurring Benefits
November 2, 2015
Benefit
Storage Savings
Staff Reduction (2 people)
Reduced Order Rework
Increased Sales
Faster Order Processing
Better Data Management
Streamline Activities
Total Recurring Benefits

Approximate
Dollar Value
$30,000.00
$77,500.00
$14,000.00
$100,000.00
$40,000.00
$125,000.00
$80,000.00
$466,500.00

Piedmont Trailer Manufacturing Company


Custom Order Tracking Project
Economic Feasibility Summary
November 2, 2015
Discount Rate

14%
Year

Year
Benefits
Recurring Value of Benefits
Present Value Factor
Present Value of Benefits
Net Present Value of All Benefits

$0
1.000000
$0.00
$0.00

$466,500.00
0.877193
$409,210.53
$409,210.53

$466,500.00
0.769468
$358,956.60
$768,167.13

$466,500.00
0.674972
$314,874.21
$1,083,041.34

$466,500.00
0.592080
$276,205.45
$1,359,246.79

$466,500.00
0.519369
$242,285.48
$1,601,532.27

(370,703.00)
0.00
1.000000
0.00
(370,703.00)

(318,000.00)
0.877193
(278,947.37)
(649,650.37)

(318,000.00)
0.769468
(244,690.67)
(894,341.04)

(318,000.00)
0.674972
(214,640.94)
(1,108,981.98)

(318,000.00)
0.592080
(188,281.53)
(1,297,263.51)

(318,000.00)
0.519369
(165,159.24)
(1,462,422.75)

Cash Flow Analysis


Yearly NPV Cash Flow
Overall NPV Cash Flow

(370,703.00)
(370,703.00)

130,263.16
(240,439.84)

114,265.93
(126,173.91)

100,233.27
(25,940.64)

87,923.92
61,983.28

77,126.25
139,109.52

IRR:

(370,703.00)

148,500.00

148,500.00

148,500.00

148,500.00

148,500.00

Costs
One-Time Costs
Recurring Costs
Present Value Factor
Present Value of Recurring Costs
Net Present Value of All Costs
Overall Net Present Value

Break-even Occurs Between:

Years 4 and 5

Totals

$1,601,532.27

(1,462,422.75)
$139,109.52

28.724918%

Piedmont Trailer Manufacturing Company


Custom Order Tracking Project
One-Time Costs
November 2, 2015
Cost
Development Personnel
Training
Project-Related Technology Purchases
Site Preparation
Miscellaneous
Conference-Related
Supplies
Duplication
Total One-Time Costs

Approximate
Dollar Value
(142,000.00)
(45,000.00)
(65,000.00)
(120,000.00)
(7,500.00)
(2,704.00)
(3,249.00)
(385,453.00)

Piedmont Trailer Manufacturing Company


Piedmont Trailer Manufacturing Company
Custom Order-Tracking Project
November 2, 2015
Discount Rate

14%
Year

Year
Benefits
Recurring Value of Benefits
Present Value Factor
Present Value of Benefits
Net Present Value of All Benefits

$0
1.000000
$0.00
$0.00

$466,500.00
0.877193
$409,210.53
$409,210.53

$466,500.00
0.769468
$358,956.60
$768,167.13

$466,500.00
0.674972
$314,874.21
$1,083,041.34

$466,500.00
0.592080
$276,205.45
$1,359,246.79

$466,500.00
0.519369
$242,285.48
$1,601,532.27

(385,453.00)
0.00
1.000000
0.00
(385,453.00)

(318,000.00)
0.877193
(278,947.37)
(664,400.37)

(318,000.00)
0.769468
(244,690.67)
(909,091.04)

(318,000.00)
0.674972
(214,640.94)
(1,123,731.98)

(318,000.00)
0.592080
(188,281.53)
(1,312,013.51)

(318,000.00)
0.519369
(165,159.24)
(1,477,172.75)

Cash Flow Analysis


Yearly NPV Cash Flow
Overall NPV Cash Flow

(385,453.00)
(385,453.00)

130,263.16
(255,189.84)

114,265.93
(140,923.91)

100,233.27
(40,690.64)

87,923.92
47,233.28

77,126.25
124,359.52

IRR:

(385,453.00)

148,500.00

148,500.00

148,500.00

148,500.00

148,500.00

Costs
One-Time Costs
Recurring Costs
Present Value Factor
Present Value of Recurring Costs
Net Present Value of All Costs
Overall Net Present Value

Break-even Occurs Between:

Years 4 and 5

Totals

$1,601,532.27

(1,477,172.75)
$124,359.52

26.749302%

Piedmont Trailer Manufacturing Company


Custom Order Tracking Project
Economic Feasibility Summary
November 2, 2015
Discount Rate

14%
Year

Year
Benefits
Recurring Value of Benefits
Present Value Factor
Present Value of Benefits
Net Present Value of All Benefits

$0
1.000000
$0.00
$0.00

$434,000.00
0.877193
$380,701.75
$380,701.75

$434,000.00
0.769468
$333,948.91
$714,650.66

$434,000.00
0.674972
$292,937.64
$1,007,588.30

$434,000.00
0.592080
$256,962.84
$1,264,551.14

$434,000.00
0.519369
$225,406.00
$1,489,957.14

(370,703.00)
0.00
1.000000
0.00
(370,703.00)

(318,000.00)
0.877193
(278,947.37)
(649,650.37)

(318,000.00)
0.769468
(244,690.67)
(894,341.04)

(318,000.00)
0.674972
(214,640.94)
(1,108,981.98)

(318,000.00)
0.592080
(188,281.53)
(1,297,263.51)

(318,000.00)
0.519369
(165,159.24)
(1,462,422.75)

Cash Flow Analysis


Yearly NPV Cash Flow
Overall NPV Cash Flow

(370,703.00)
(370,703.00)

101,754.39
(268,948.61)

89,258.23
(179,690.38)

78,296.70
(101,393.68)

68,681.31
(32,712.37)

60,246.77
27,534.39

IRR:

(370,703.00)

116,000.00

116,000.00

116,000.00

116,000.00

116,000.00

Costs
One-Time Costs
Recurring Costs
Present Value Factor
Present Value of Recurring Costs
Net Present Value of All Costs
Overall Net Present Value

Break-even Occurs Between:

Years 4 and 5

Totals

$1,489,957.14

(1,462,422.75)
$27,534.39

17.049417%

Piedmont Trailer Manufacturing Company


Custom Order Tracking Project
Recurring Benefits
November 2, 2015
Proposed Project
Delivery System
Human Resources System
Inventory Tracking System
Forecasting System

IRR for Custom Tracking System: 17%

IRR
15.70%
27.80%
18.90%
23.70%

Looking at the IRR's,management should not fund the custom order-tracking system because it has a low
IRR(17%) compared to the proposed projects listed above

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