MATH 33 Mathematics For Sustainability

Question:

Imagine that you’re responsible for the launch of a new website at a local non-profit.

There are many one-time expenses, such as equipment purchase or lease, equipment install, hardware and software, disruption to other employees, and equipment rental.

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There are substantial one-time expenses associated with purchasing the equipment (web server and cabling, installation, and other software).

The server may require structural modifications (electric outlets, lighting, cooling, lighting and other security devices) to its location.

These potential structural modifications are one-time expenses.

These costs can be recurring, such as the cost of software and equipment replacement, website updates, renewals, and staffing.

Let’s say that the initial costs for implementing the website were $50,000, and that the recurring costs were $10,000 each year.

Let’s assume that the benefits are $40,000/year, with a 10% discount rate and a 5-year time horizon.

Next, please complete the following:

Calculate the net return and present value of your investment.

Include a Breakeven Analysis

A sample Project Scope statement can be created

Answer:

1. The Present Value

Special Discount

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Total

Costs

Discount factor

Get Discounted Prices

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Total

Discount factor

Enjoy Discounted Benefits

Total discounted costs – total discounted benefits

Enjoy Discounted Benefits

Get Discounted Prices

ROI

Particulars

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Reduced Benefits-Costs

We can see that the payback period runs from years 4 to 5.

Payback period = No.

Number of years until first positive cumulative cashflow +

(Absolute value for the last negative cumulative cashflow /

Cash flow during the year of the first positive cumulative cashflow

Payback period =

It is about to

Therefore, the company will be profitable in five years.

3.Project Scope Statement

In this scenario, the responsibility for creating a website for a local nonprofit organization is shared.

There might be several costs involved, some of which are one-time and others that can be recurring.

Therefore, it is essential to know all costs and benefits and calculate them effectively.

Objectives

The scenario’s purpose is to assess whether the launch is economically feasible.

Robinson & Burnett (2016).

Therefore, it is necessary to calculate the net present value. A negative number indicates the project’s failure (Kashyap (2014)).

The return on investment should be positive. A break-even analysis must also be performed to determine whether the project will be able to recover its initial outflow. Hayward and colleagues (2016).

Therefore, it is necessary to calculate the above factors in order to assess the project’s benefit (Abor 2017).

Analyse Of The Present Scenario

The net present value of the project is $63,724, which makes it viable.

The ROI of the project is 72% which makes it a positive one.

The analysis of payback (or break even) shows that the initial investment can be recouped within 5 years.

Conclusion

Because there are no negative elements, the manager must manage the project.

Refer to

Capital Budgeting: Evaluating Capital Investment decisions

Entrepreneurial finance for MSMEs (pp.

Springer International Publishing.

Capital budgeting surveys: The future is now.

Capital Budgeting, Investment Decisions.

Australian Biotechnology Firms provide evidence of entrepreneurs’ capital budgeting orientations and innovation outputs.

Long Range Planning.

Capital Allocating Decisions: Money Value in Time.

Asian Journal of Management 5(1), 106–110.

Financial Management Practices. An Exploratory Study of Capital Budgeting Techniques.

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