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Cost-Benefit Analysis

The document presents a cost-benefit analysis for implementing an inventory management system at a feed mill over a period of 5 years. It estimates implementation costs of $230,000 in year 0 and ongoing operating costs each year. Benefits are estimated at $150,000 in year 1 and increase each subsequent year, including tangible benefits and a variety of intangible benefits. A net present value is calculated each year to compare cumulative costs and benefits, showing the system becoming cost-beneficial by year 3.

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NISREEN WAYA
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198 views

Cost-Benefit Analysis

The document presents a cost-benefit analysis for implementing an inventory management system at a feed mill over a period of 5 years. It estimates implementation costs of $230,000 in year 0 and ongoing operating costs each year. Benefits are estimated at $150,000 in year 1 and increase each subsequent year, including tangible benefits and a variety of intangible benefits. A net present value is calculated each year to compare cumulative costs and benefits, showing the system becoming cost-beneficial by year 3.

Uploaded by

NISREEN WAYA
Copyright
© © All Rights Reserved
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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COST-BENEFIT ANALYSIS

GENSAN FEED MILL


Inventory Management System
PERIODS (YEAR)
COSTS 0 1
Development Cost
Inventory Managment System (80,000.00)
Project Technical Expert (For Training) (16,000.00)
Contingency Fund (4,000.00)
Equipment (Computer set) (130,000.00)
Operating Cost (5,000.00)
TOTAL COSTS (230,000.00) (5,000.00)
Discount Factor 1.00 0.87
Present Value of Costs (230,000.00) (4,350.00)
Cumulative Present Value Costs (230,000.00) (234,350.00)

BENEFITS
Tangible Benefits from new system 15,000.00
Intangible Benefits from new system
Promote accuracy 15,000.00
Automated routine tasks 20,000.00
Improve efficiency of staff 50,000.00
Increase office productivity 30,000.00
Replace paper processes 20,000.00
TOTAL BENEFITS - 150,000.00
Discount Factor 1.00 0.87
Present Value of Benefits - 130,500.00
Cumulative Present Value Costs - 130,500.00

COST/BENEFIT ANALYSIS ₱ -230,000.00 ₱ -103,850.00


FIT ANALYSIS
FEED MILL
agement System
PERIODS (YEAR)
2 3 4 5

(5,500.00) (6,050.00) (6,655.00) (7,320.50)


(5,500.00) (6,050.00) (6,655.00) (7,320.50)
0.76 0.66 0.57 0.50
(4,162.95) (3,983.94) (3,812.63) (3,648.69)
(238,512.95) (242,496.89) (246,309.53) (249,958.22)

16,500.00 18,150.00 19,965.00 21,961.50

16,500.00 18,150.00 19,965.00 21,961.50


22,000.00 24,200.00 26,620.00 29,282.00
55,000.00 60,500.00 66,550.00 73,205.00
33,000.00 36,300.00 39,930.00 43,923.00
22,000.00 24,200.00 26,620.00 29,282.00
165,000.00 181,500.00 199,650.00 219,615.00
0.76 0.66 0.57 0.50
124,888.50 119,518.29 114,379.01 109,460.71
255,388.50 374,906.79 489,285.80 598,746.51

₱ 16,875.55 ₱ 132,409.90 ₱ 242,976.28 ₱ 348,788.30

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