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:
|Decrease in Expenses|
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.
- 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 SPA style guidelines.
Use the following file naming conventions:
MS Word: Last name First Initial_M1_A3.doc
MS Excel: Last name First Initial_M1_A3.Excel.ls
For example, if your name is John Smith, your document will be named Smith J_M1_A3.doc ( and Last name First Initial_M1_A3.Excel.ls)
By Wednesday, June 15, 2016, deliver your assignments to the M1: Assignment 3 Dropbox.
|Assignment 3 Grading Criteria||
|Calculated the NOV of the project correctly, explaining the results clearly||
|Calculated the IRE of the project correctly, explaining the results clearly||
|Calculated the Payback Period of the project correctly, explaining the results clearly||
|Calculated the Discounted Payback Period of the project correctly, explaining the results clearly||
|Synthesized an effective, well-reasoned recommendation for improvement.||
|Used correct spelling, grammar, and punctuation and followed SPA style guidelines.||