The expected life of the initial investment is

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The expected life of the initial investment is expected to be three years. Costs: e-Commerce strategy (ongoing) Resources Costs Additional staff: (At $40,000 year average annual salary) 4 online staff 4 x $40,000 ($160,000) per year for 3 years = $480,000 4 warehouse staff 4 x $40,000 ($160,000) per year for 3 years = $480,000 6 delivery drivers 6 x $40,000 = $240,000 per year for 3 years = $720,000 Total $1,680,000 The following expenses should be incurred in the 2014 financial year and be included in associated financial targets for spending: Additional staff $400,00 0 Additional marketing $300,00 0 Additional training $51,000 Recruitment $30,000 Benefits to business According to financial projection prepared by the CFO, the business expects the proposed strategy to be profitable over three years. LLOYDS INTERNATIONAL COLLEGE © Innovation and Business Industry Skills Council Ltd. Modified sep 2020 1 st edition version: 3.1 Page 9 of 40
Assessment Task 1 BSBMGT517 Manage operational plan Profitability index over three years Profitability index (PI) = Present value (PV) of future cash flows Present value (PV) of initial investment PI>1 indicates project should be undertaken FY 2014 FY 2015 FY 2016 Cash flow from operations (minus ongoing operational costs associated with e-commerce such as additional staffing) $200,00 0 $500,00 0 $800,00 0 Present value of future cash flows (discounted future cash flows with respect to opportunity cost, inflation) $180,000 +$420,000+ $600,000 = $1,200,000 Present value of initial investment $861,000 Profitability index 1.39 The expected additional profit for 2014 would be $200,000. This figure should be added to targets. Risks to implementation After consulting with stakeholders at BBQfun, you determine: medium risk of poor online sales high risk of customer service quality problems for online customers leading to a breach of consumer law high risk of staff misunderstanding changes and considering online sales as threat to jobs medium risk of not being able to recruit fully trained online staff low risk of loss of IP relating to confidential information contained within the e-commerce strategy when employees leave the organisation medium risk of loss of IP ownership if a relationship with the website developer contract ceases low level risk of not complying with WHS legislation through lack of risk assessment conducted on potential musculoskeletal disorders 8 resulting from poor customer service workstation design 8 LLOYDS INTERNATIONAL COLLEGE © Innovation and Business Industry Skills Council Ltd. Modified sep 2020 1 st edition version: 3.1 Page 10 of 40
Assessment Task 1 BSBMGT517 Manage operational plan medium risk of wastage due to overstocking product in anticipation of increased online sales. All additional costs associated with contingency planning will be approved in accordance with BBQfun policies and procedures. Musculoskeletal disorders (MSD) are injuries or disorders of the muscles, nerves, tendons, joints, cartilage, and spinal discs LLOYDS INTERNATIONAL COLLEGE © Innovation and Business Industry Skills Council Ltd.

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