System analysis

Assume you are hired by the XYZ company as Systems Analyst to prepare a cost-benefit analysis report for building an R&D laboratory for its staff with the following specifications:

• The company already have a large hall reserved for the purpose, meaning the owner will not have to rent the space.


• The lab will have ten computer spaces with a computer table and chair.


• Each computer space is to be equipped with a high-performance laptop, a headphone and a scanner.


• Each laptop will have an operating system (i.e. Microsoft Windows), word processing package (i.e. Microsoft Office 2016) and an antivirus (i.e. Kaspersky Antivirus) installed


• All the computers need to be connected with the internet (requiring the purchase of a router and internet connection from an Internet Service Provider)


• The laptops in the lab will share a heavy-duty printer available on the network

This lab will be established in Year 0 and you have to calculate the cost of establishing it. You can use the e-commerce websites (e.g. Amazon Saudi Arabia, Jarir Book Store, Extra Store etc.) to gather the costs of each of the above-mentioned items to be purchased and thus estimate the total cost of establishing the lab (in SAR).

Once the lab is operational, benefits and ongoing costs are projected over a period of three years according to the table shown below:

Year 0

Year 1

Year 2

Year 3

Total

Total Benefits

25,000

40,000

62,000

Total Costs

To be estimated

10,000

11,000

17,000

(Note: The cost of establishing the lab that you have already estimated (in SAR) for year zero is to be entered in the cell “To be estimated” in the table)

Based on the information in the table above, calculate:

1. The total benefits and total costs over the duration of three years.


2. The return on investment (ROI)


3. The break-even point (BEP)