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Assignment 01
Part I Give brief Descriptions to the following

questions
1: What is economic feasibility in systems analysis

and design, and why is it important?
Economic feasibility is the process of evaluating whether a proposed
project or system is financially viable. It’s not just about numbers; it’s
about understanding the potential impact on the organization. This
analysis is crucial because it helps decision-makers weigh the expected
benefits against the costs, ensuring that resources are allocated wisely.
When organizations invest in projects that promise good returns, they
pave the way for growth and innovation, creating a brighter future for
everyone involved.
2: Describe the two main types of costs considered
in economic feasibility analysis and provide
examples of each.
In economic feasibility analysis, we encounter two main types of costs:
 Tangible Costs: These are the clear, measurable expenses that
come with a project. For example:
 Purchasing new hardware, like computers or servers.
 Paying for software licenses.
 Covering installation and training costs.
 Intangible Costs: These costs are less visible but can have a profound
effect on an organization. Examples include:
 Decreased employee morale due to changes in workflow.
 Potential loss of customer satisfaction or loyalty.
Understanding both types of costs helps organizations make informed
decisions that consider not just immediate financial impact but also long-
term effects on their culture and customer relationships.
3: Explain the concept of "return on investment

(ROI)" and how it is used in economic feasibility
analysis.
Return on Investment (ROI) is a powerful tool that measures how
effectively an investment generates profit. It’s calculated by comparing
net profit to the initial investment, expressed as a percentage:
NetProfit
ROI¿ InitialInvestment ×100
In economic feasibility analysis, ROI serves as a guiding light for
stakeholders. It helps them understand the financial return they can
expect from a project, allowing them to make choices that align with
their strategic goals and aspirations. A strong ROI can inspire
confidence and motivate teams to pursue innovative solutions.
4: What is a "break-even analysis," and how does it
help in determining economic feasibility?
Break-even analysis is like a financial compass that tells organizations

when they will start making money from their investments. It identifies
the point at which total revenues equal total costs—meaning there’s no
profit or loss. This understanding is vital for businesses as it helps them
gauge how long it will take to recoup their initial investment. Knowing
when they’ll break even allows companies to plan better and manage
expectations, fostering a sense of security as they embark on new
projects.
5: How do intangible benefits play a role in

economic feasibility, and why should they not be
ignored in the analysis?
Intangible benefits, while harder to quantify, can significantly influence a

project's success. These include improvements in employee morale,
enhanced customer satisfaction, or even better brand reputation. Ignoring
these benefits could lead to missed opportunities for growth and
innovation. When organizations recognize the value of intangible
benefits, they can create environments where employees thrive and
customers feel valued—ultimately leading to greater success and
sustainability.
Part II: Quantitative Questions

Question 1: Net Present Value (NPV) Calculation
A company is considering investing in a new system with projected cash
flows over five years as follows:
 Year 1: $50,000
 Year 2: $60,000
 Year 3: $70,000
 Year 4: $80,000
 Year 5: $90,000
The initial investment for this project is $200,000, with a required rate of
return of 10%.
Answer:
To calculate the NPV, we use this formula:
Ct
t - −C0
NPV =∑
(1+r )
Where:
 Ct = cash flow at time t
 r = discount rate (10% or 0.10)
 C0 = initial investment ($200,000)
Calculating each year's present value:
50,000
 Year 1: ¿ 1
(1+0.10)
60,000
 Year 2: ¿ 2 = 49,586.78
(1+0.10)
70,000
 Year 3: ¿ 3 = 52,965.29
(1+0.10)
80,000
 Year 4: ¿ 4 = 55,638.76
(1+0.10)
9 0,000
 Year 5: ¿ 5 = 55,638.76
(1+0.10)

Adding these values gives us a total present value of:
NPV=(45,454.55+
49,586.78+52,965.29+55,638.76+55,427.66)−200,000)
Calculating this results in:
NPV=259072.04−200000=59072.04
Thus, the NPV of the project is $59,072.04. Question 2: Return on

Investment (ROI) Calculation
For a company that invests $150,000 in a new system and generates net
profits over three years as follows:
 Year 1: $50,000
 Year 2: $60,000
 Year 3: $70,000
To calculate ROI:
Total net profit after three years:
TotalProfit=50,000+60,000+70,000=180,000
Using the ROI formula:
NetProfit
ROI¿ InitialInvestment ×100
Substituting values:
180000−15000
ROI¿ 150000 ×100
Simplifying gives:
30000
RO¿ 150000 ×100 =20%.
So the ROI for this system is 20%.
3: Payback Period Calculation
For a project requiring an initial investment of $250,000 and expected

cash inflows of $75,000 per year for five years:To calculate the Payback
Period:
I nitial Investment
Payback Period = Anual cas flow
Substituting values gives us:

25000 0
Payback Period = 75000 =3.3 years
This means it will take approximately 3 years and about 4 months to

recover the initial investment. This assignment not only covers essential
concepts but also emphasizes the emotional connection organizations
have with their investments—highlighting how careful planning can lead
to thriving workplaces and satisfied customers!

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Assignment 01

Part I Give brief Descriptions to the following

1: What is economic feasibility in systems analysis

3: Explain the concept of "return on investment

Break-even analysis is like a financial compass that tells organizations

5: How do intangible benefits play a role in

Intangible benefits, while harder to quantify, can significantly influence a

Part II: Quantitative Questions

Adding these values gives us a total present value of:

Thus, the NPV of the project is $59,072.04. Question 2: Return on

So the ROI for this system is 20%.

3: Payback Period Calculation

For a project requiring an initial investment of $250,000 and expected

Substituting values gives us:

This means it will take approximately 3 years and about 4 months to

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