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    Handstar Case Excel Calculations

    Uploaded by

    Nithya Nair
    This document presents an NPV analysis of potential software projects for Handstar Inc. It calculates the estimated revenues, costs, and NPV for 6 projects over 3 years. The projects are ranked based on their NPV. The top projects selected within the available development hours of 10,525 hours are projects 1, 2, 4, 5, and 6, with a total NPV of $13.1 million. Hiring an additional software engineer for $130,000 would allow an additional project to be completed, increasing the total NPV by $443,018 and providing a net profit of $313,018. Therefore, the document suggests Handstar Inc. should hire the additional engineer.

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    Handstar Case Excel Calculations

    Uploaded by

    Nithya Nair
    298 views4 pages
    This document presents an NPV analysis of potential software projects for Handstar Inc. It calculates the estimated revenues, costs, and NPV for 6 projects over 3 years. The projects are ranked based on their NPV. The top projects selected within the available development hours of 10,525 hours are projects 1, 2, 4, 5, and 6, with a total NPV of $13.1 million. Hiring an additional software engineer for $130,000 would allow an additional project to be completed, increasing the total NPV by $443,018 and providing a net profit of $313,018. Therefore, the document suggests Handstar Inc. should hire the additional engineer.

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    This document presents an NPV analysis of potential software projects for Handstar Inc. It calculates the estimated revenues, costs, and NPV for 6 projects over 3 years. The projects are ranked based on their NPV. The top projects selected within the available development hours of 10,525 hours are projects 1, 2, 4, 5, and 6, with a total NPV of $13.1 million. Hiring an additional software engineer for $130,000 would allow an additional project to be completed, increasing the total NPV by $443,018 and providing a net profit of $313,018. Therefore, the document suggests Handstar Inc. should hire the additional engineer.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    298 views4 pages

    Handstar Case Excel Calculations

    Uploaded by

    Nithya Nair
    This document presents an NPV analysis of potential software projects for Handstar Inc. It calculates the estimated revenues, costs, and NPV for 6 projects over 3 years. The projects are ranked based on their NPV. The top projects selected within the available development hours of 10,525 hours are projects 1, 2, 4, 5, and 6, with a total NPV of $13.1 million. Hiring an additional software engineer for $130,000 would allow an additional project to be completed, increasing the total NPV by $443,018 and providing a net profit of $313,018. Therefore, the document suggests Handstar Inc. should hire the additional engineer.

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    HANDSTAR INC NPV CALCULATIONS

    Hour rate $52.00


    Discount rate 12%

    Estimated revenue
    Sr No. Product Project Type Development Hours for 1st year

    1 Calendar + Email Update 1250 $ 750,000.00


    2 Expense report Update 400 $ 250,000.00
    3 Portfolio tracking Update 750 $ 500,000.00
    4 Spreadsheet New Project 2500 $ 1,000,000.00
    5 Web Browser New Project 1875 $ 2,500,000.00
    6 Trip Planner New Project 6250 $ 1,300,000.00
    6775
    Development Hours Available = 2,500*4 = 10,000 Hour
    Selecting Projects to Maximize NPV
    Projects Selected(Highlighted in Blue): Project Ranked - 1,3,4,5,6
    Total Development Hours= 6,775
    Total NPV = $ 12,682,264.76
    Revenue
    Growth rate Cost Present Value
    Year 1 Year 2 Year 3 of Revenue
    0.90 $ 65,000.00 $ 750,000.00 $ 675,000.00 $ 607,500.00 $ 1,640,155.23
    1.05 $ 20,800.00 $ 250,000.00 $ 262,500.00 $ 275,625.00 $ 628,662.11
    1.05 $ 39,000.00 $ 500,000.00 $ 525,000.00 $ 551,250.00 $ 1,257,324.22
    1.10 $ 130,000.00 $ 1,000,000.00 $ 1,100,000.00 $ 1,210,000.00 $ 2,631,024.51
    1.15 $ 97,500.00 $ 2,500,000.00 $ 2,875,000.00 $ 3,306,250.00 $ 6,877,398.70
    1.05 $ 325,000.00 $ 1,300,000.00 $ 1,365,000.00 $ 1,433,250.00 $ 3,269,042.97
    NPV Ranking

    $ 1,575,155.23 4
    $ 607,862.11 6
    $ 1,218,324.22 5
    $ 2,501,024.51 3
    $ 6,779,898.70 1
    $ 2,944,042.97 2
    Handstar Inc.

    NPV Approach

    Develop
    Sr No. Product Project Type ment NPV Ranking
    Hours
    1 Calendar + Email Update 1250 $ 1,575,155.23 4
    2 Expense report Update 400 $ 607,862.11 6
    3 Portfolio tracking Update 750 $ 1,218,324.22 5
    4 Spreadsheet New Project 2500 $ 2,501,024.51 3
    5 Web Browser New Project 1875 $ 6,779,898.70 1
    6 Trip Planner New Project 6250 $ 2,944,042.97 2

    Development Hours Available = 2,500*5 = 12,500 Hour


    Projects Selected(Highlighted in Blue): Project Ranked - 1,2,4,5,6
    Total Development Hours= 10,525
    Total NPV = $ 13,125,283.22

    Additional Cost = $ 130,000.00


    Additional NPV = $ 443,018.46
    Net Profit = $ 313,018.46 >0

    1. Considering the assumption that, total development hours are calculated with the factor that each
    developer's efficiency is 90%
    2. Irrespective of rankings, the update projects will be taken first and the new
    projects will be taken based on ranking

    SUGGESTION HIRE ADDITIONAL SOFTWARE ENGINEER

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