Documentos de Académico
Documentos de Profesional
Documentos de Cultura
JOHN SMITH, CHIEF INFORMATION OFFICER BOBBY DELEE, IT MANAGER FEASIBILITY ANALYSIS 01/27/12
Introduction
This memo pertains to the considerations made toward a lease or buy situation on a new telephony system. After careful review of the NPV analysis that was prepared, a recommendation to lease the system outweighed the option to buy.
Summary
Purchasing: By buying the phone system the company would have to make an
initial investment of $397,200 that would include the first years maintenance fees and overall lower operating costs.
Leasing: Based on the numbers that came about from the NPV analysis, it
would seem that leasing is the better option, with a savings of $5,138 over 7 years and an NPV value of 0.95%. This option is very feasible.
NPV Analysis: An analysis has been prepared showing the cost differences
between buying and leasing using a present value of 9%. As the analysis will show, it is very close in cost to either buy or lease.
Analysis
Confidential
Page 1
1/31/2014
Conclusions
By taking in all the factors involved in buying or leasing its ultimately up to the financing department to crunch the numbers and make the final decision. The analysis can be run with different present values to drop the NPV to zero and find out the IRR to get a better feel for the type of return to expect from the investment. Should the company decide to buy and have an asset of value or lease with options to upgrade when the time is right, either decision will make sense. Its the recommendation of this team that the lease option be considered.
Future Action
The next step in moving forward is to immediately begin the planning stage to see the implementation of the PBX. With so many factors involved with installing and operating such a complex piece of hardware, time becomes an issue, which costs money. With over 900 employees, the company needs to see to an effective form of communication with their customers, both internally and externally. Thank you for your time.
7-Year Economic Evaluation of PBX Alternatives Pre-Tax Analysis; Includes Inflation Allowance Uses "Standard Economic Model" Format & Assumptions
Only the cells highlighted in yellow require student input. Description Product Costs: PBX Voice Mail Spares Installation Sof tw are Shipping Trunk Installation Training Total Installed Cost Annual Costs: Lease Maintenance Moves, Adds, Changes Trunk Costs Annual Sof tw are Upgrades Floor Space (Sq. Ft.) Floor Space Costs Pow er & Air Cond (KW/Hr) Pow er & Air Cond Costs Depreciation (Straight Line) Salvage Value Purchase ($340,300) ($33,700) ($2,450) ($10,500) ($10,250) $0 $0 $0 ($397,200) Purchase $0 ($35,500) ($5,580) ($24,000) ($500) 325 ($33) 1.20 ($1,682) $71,496 $39,720 Lease $0 $0 $0 $0 $0 $0 $0 $0 $0 Lease ($53,000) $0 ($5,580) ($24,000) $0 325 ($33) 1.20 ($1,668) $0 $0 Com m on Cost Data Inf lation% Annual Inf lation Factor Pow er $/KWHr Cost of Money Depreciation Period (Years) Salvage% Floor Space$ ($/yr/sq f t) Item 5% 105% $0.16 7% 5 10% $24.00
Af f ects all costs except Lease Costs and Sof tw are Upgrades
Any number in parantheses represents a cost or negative cash f low . Enter them as negative numbers in the tab Numbers not in parantheses are benef its or positive cash f low . Enter them as positive numbers in the tables belo
Floor Space (Sq. Ft) * Floor Space Cost ($) Assume 24 hours a day, 365 days a year - 24 * 365 * KW/Hr * $/KWHr (Total Installed Cost - Salvage Value)/Depreciation Period (Years) Salvage% * Total Installed Cost
Description Purchase Operating Costs Maintenance Moves, Adds, Changes Trunk Costs Sof tw are (1) Floor Space Pow er & Air Conditioning Depreciation Salvage Annual Operating Costs Chart PV Factors PV Operating Costs Purchase Initial Cost Total PV Operating Cost TOTAL LCA COST
Year 0 ($35,500) ($5,580) ($24,000) ($500) ($7,800.00) ($1,682) $71,496 $0 ($3,566) 1.0000 ($3,566) ($397,200) ($143,796) ($540,996)
Total ($253,541) ($45,432) ($195,408) ($3,500) ($63,508) ($13,694) $357,480 $39,720 ($213,384)
($95,662)
0.9174
($6,692)
0.8417
($9,434)
0.7722
($11,829)
0.7084
($13,909)
0.6499
($62,171)
0.5963
($36,195)
Use the PV Factor Chart to find the Factor ($143,796) at the given cost of m oney. The factor for
Description Lease Operating Costs Lease Costs Maintenance Moves, Adds, Changes Trunk Costs Sof tw are Floor Space Pow er & Air Conditioning Depreciation Salvage Annual Operating Costs Chart PV Factors PV Operating Costs Lease Initial Cost Total PV Operating Cost TOTAL LCA COST
Year 0 ($53,000) $0 ($5,580) ($24,000) $0 ($7,800.00) ($1,682) $0 $0 ($92,062) 1.0000 ($92,062) $0 ($535,858) ($535,858)
Year 3
Year 4
Year 5
Year 6
($53,000) ($53,000) ($53,000) ($53,000) $0 $0 $0 $0 ($6,460) ($6,783) ($7,122) ($7,478) ($27,783) ($29,172) ($30,631) ($32,162) $0 $0 $0 $0 ($9,029) ($9,481) ($9,955) ($10,453) ($1,947) ($2,044) ($2,147) ($2,254) $0 $0 $0 $0 $0 $0 $0 $0 ($98,219) ($100,480) ($102,854) ($105,347) 0.7722 0.7084 0.6499 0.5963 ($75,845) ($71,180) ($66,845) ($62,818)
Use the PV Factor Chart to find the Factor ($535,858) at the given cost of m oney. The factor for
Purchase vs. Lease Cost Com parison Description Purchase Initial Costs ($397,200) Total PV Operating Cost ($143,796) TOTAL LCA COST ($540,996)