Net Present Value, ROI, And Break-Even Analysis Of Website Launch For Non-Profit Organization

Assume you are put in charge of launching a new website for a local non-profit organization. There are several one-time costs, including equipment purchase or lease, equipment installation, hardware and software, and disruption to the rest of the organization. The purchase of the equipment (web server, cabling, installation, and software) presents substantial one-time costs. Structural modifications to the facilities where the server will reside may be required (electrical outlets, cooling, lighting, door locks, and other security devices). These possible structural modifications represent one time costs. Recurring costs include the costs of maintaining and replacing equipment and software, updating the website, renewing the domain names, and for the personnel required to fulfill these tasks.

Let us assume that the one time costs of implementing the website are $50,000 and the recurring costs are $10,000 per year. Assume the benefits are $40,000 per year, a 10 percent discount rate, and a five-year time horizon.

Next, complete the following:

1. Calculate the net present value and return on investment.
2. Include a Breakeven Analysis
3. Create a sample Project Scope statement

Therefore,

In the given scenario, there is a responsibility to launch a new website for a local non-profit organization. There may be several costs, which may be one-time or recurring in nature. Hence, all the costs and benefits must be known and calculated effectively.

The objective of the scenario is to calculate whether the launching of the product is cost effective or not. There are various requirements to be fulfilled while checking the viability of a project (Robinson & Burnett, 2016). Thus, the net present value must be calculated which must be positive as a negative figure represents the failure of a project (Kashyap, 2014).

The return on investment must be positive and the break-even analysis must be done to know whether the project is able to get back or recover its initial outflow (Hayward et al., 2016). Thus, the beneficial capacity of the project must be known from the calculation of the above factors (Abor, 2017).

The net present value is $63,724, which is a positive figure, making the project viable. The ROI is 72% making the project a beneficial one. As per the analysis of payback or break even, we can conclude that the initial amount can be recovered by 5years after the start of the project.

Conclusion

The manager must undertake the project, as there are no negative factors.

References

Abor, J. Y. (2017). Evaluating Capital Investment Decisions: Capital Budgeting. In Entrepreneurial Finance for MSMEs (pp. 293-320). Springer International Publishing.

Burns, R., & Walker, J. (2015). Capital budgeting surveys: the future is now.

Götze, U., Northcott, D., & Schuster, P. (2015). Capital Budgeting and Investment Decisions. In Investment Appraisal (pp. 3-26). Springer Berlin Heidelberg.

Hayward, M., Caldwell, A., Steen, J., Gow, D., & Liesch, P. (2016). Entrepreneurs' Capital Budgeting Orientations and Innovation Outputs: Evidence From Australian Biotechnology Firms. Long Range Planning.

Kashyap, A. (2014). Capital Allocating Decisions: Time Value of Money. Asian Journal of Management, 5(1), 106-110.

Robinson, C. J., & Burnett, J. R. (2016). Financial Management Practices: An Exploratory Study of Capital Budgeting Techniques in the Caribbean Region.