The IT department has requested an update in its server population. This upgrade is required to maintain a competitive position. The CEO has asked that you evaluate the project and submit a recommendation to her, in terms of whether the company should move forward with this request. The calculated value of the project is a reduction of expenses, including power and replacement costs, as shown in Table-1:

Year	Decrease in Expenses
1	$30,000.00
2	$100,000.00
3	$120,000.00
4	$100,000.00
5	$30,000.00

Assume the impact after five years to be immeasurable.  The cost of capital to the firm is currently 8% and the cost of the project today is $286,000.

Required:

• Calculate the net present value of the project
• Calculate the internal rate of return
• Calculate the payback period
• Calculate the discounted payback period

 

 

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