HW 4 Solution - = 525K 3050(1-0.3 =2135K 1200(1-0.3 = 840K...

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Solution for Homework #4 Baseline Cost: Company 2006 2007 2008 2009 Possibility Sierra M.B. 2500k 1500k 1 Leisure M. 2500k 1500k 0.7 U.S. Scuba 2500k 1500k 0.5 RacerBikes 2500k 1500k 0.3 Expected Baseline Cost: Company 2006 2007 2008 2009 Possibility Sierra M.B. 2500k 1500k 1 Leisure M. 1750 1050 0.7 U.S. Scuba 1250 750 0.5 RacerBikes 750 450 0.3 Sum 2500k 3250 3050 1200 Since: The cost of the PLA& RC = cost of the baseline * EAF /EFA B aseline Baseline Reusable / Baseline RUSE 1 1.15 1.15 RELY 1.1 1.26 1.145 DOCU 1 1.1 1.1 Cost(Reusable)/Cost(Baseline) = 1.15 * 1.145 * 1.1 = 1.46 Investment on Reusable Architecture and components = 1.46 * Cost (Baseline) – Cost (Baseline) = 1150K in 2006; 690K in 2007 (2 points) Expected Cost Savings in Current Dollar: 2006 2007 2008 2009 Savings (Benefit) 0 1750 * (1-0.7)
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Unformatted text preview: = 525K 3050 * (1-0.3) =2135K 1200 * (1-0.3) = 840K Cost in each year 1150K 690K Net benefit (Benefit – Cost) 0-1150 = -1150k 525-690 = -165k 2135-0 = 2135k 840 – 0 = 840K Cumulative net benefit-1150K-1150 + -165 = - 1315K-1315 + 2135 = 820K 820K + 840K = 1660K Expected Cost Savings in 2006 Dollar: D = 1/(1+0.09) = 0.9174 2006 2007 2008 2009 Cumulative Cost in 2006 dollar 3650k-2500k = 1150k 1150 + 690 * 0.9174 = 1783K 1783 1783 Cumulative net benefit in 2006 Dollar-1150K-1150 + -165 * 0.9174 = -1301.3K 1301.3 + 2135 * D^2 = 495.6K 495.6K+ 840K * D^3 = 1144.2K ROI (n 2006 dollar)-1150/1150 = -1-1301.3K/1783 = -0.73 495.6K/1783K = 0.28 1144.2/1783 = 0.64...
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This note was uploaded on 04/12/2010 for the course CIS 635 taught by Professor Mcintyre during the Spring '10 term at Cleary University.

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