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A IT manager is evaluating two proposals to reduce costs




Question;A IT manager is evaluating two;proposals to reduce costs in serving customers. The costs are shown below with;the benefits of each proposal being equal. One will be implemented in-house and;the other in the "Cloud". There is no salvage value nor working;capital with either proposal. The depreciation is 3-year MACRS. Both the;development and implementation costs can be depreciated if the result is not a;product to be sold. A five year time span is to be used to evaluate the;proposals.;Using a present worth criteria, which should be selected.;MACRS Rates(%);1 2 3 4 5 6;3-Year 33.33% 44.45% 14.81% 7.41%;5-year 20.00% 32.00% 19.20% 11.52% 11.52% 5.76%;Data Block In-house Cloud;Development costs $100,000 $125,000 Up front;Implementation costs $25,000 $60,000 Up front;Maintenance costs $4,000 $3,000 annual;Storage costs $20,000 $10,000 annual;Depreciation MACRS Years 3 3 years;Tax Rate 25% annually;MARR 15%


Paper#53021 | Written in 18-Jul-2015

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