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.