A new IS project has been proposed that is expected to produce not only cost savings but also an increase in revenue. The initial costs to establish the system are estimated to be $500,000. The remaining cash flow data is presented in the following table.
*THE TABLE IS IN THE SUBMITTED ATTACHMENT
(Note: All amounts are in hundreds of thousands.)
a. Using a spreadsheet program, calculate the return on investment (ROI) for this project. Assume that the cost of capital is 7 percent.
b. How would the rate of return change if the project delivered $50,000 in additional revenue and generated cost savings of $25,000 in the first year?
Can you please advise what formula is used in Excel and how to solve for the answers above? I need to show my work in Excel. Thanks!
Stair, Ralph M., George Reynolds. Principles of Information Systems, 11th Edition. Cengage Learning, 01/2013. VitalBook file.