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.
Use the following file naming conventions:
MS Word: LastnameFirstInitial_M1_A3.doc
MS Excel: LastnameFirstInitial_M1_A3.Excel.xls
For example, if your name is John Smith, your document will be named SmithJ_M1_A3.doc ( and LastnameFirstInitial_M1_A3.Excel.xls)
| Assignment Grading Criteria | Maximum Points |
| Calculated the NPV of the project correctly, explaining the results clearly | 20 |
| Calculated the IRR of the project correctly, explaining the results clearly | 20 |
| Calculated the Payback Period of the project correctly, explaining the results clearly | 20 |
| Calculated the Discounted Payback Period of the project correctly, explaining the results clearly | 20 |
| Synthesized an effective, well-reasoned recommendation for improvement. | 12 |
| Used correct spelling, grammar, and punctuation and followed APA style guidelines. | 8 |
| Total: |
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