AACS4794 MANAGEMENT INFORMATION SYSTEM Tutorial 3 answer August 18, 2010
ate benefit that can be quantified and monetary value this benefits. ThisBenefit usually come from two major sources, decreased costs or increased revenues. Costsavings or decreases in expenses come from increased inefficiency in company operations.
are the benefits that are not easily quantified, it include more efficientcustomer services or enhanced decision making. It cannot be immediately quantified, butmay lead to quantifiable in long run.b)
are, reducing staff by automating manual functions or increaseefficiency, and reducing error rates through automated editing or validating.Example of
is increased levels of services (in way that cannot bemeasured).
ayback analysis is a method to measure of time required to pay back the initial investment on aproject. It is a popular method because of its simplicity can power as an initial screening method.There are limitation for this method, such as it does not take into account the time value of money,For instance, a dollar saved today is worth more to us than a dollar saved ten years from now. Thepay back analysis does not take into account the interest earn for each annual saving.Secondly, it does not measure the overall profitability of the whole project; it does not consider anybenefits of the system that are accrued after the payback period. For instance, an alternate solutionmight produce the greatest benefits at the lowest cost a year after the payback period has ended, afact that is ignored by payback analysis.
A performance measure used to evaluate the efficiency of an investment or to compare theefficiencyof a number of different investments. To calculate ROI, the benefit (return) of aninvestment isdivided by the cost of the investment; the result is expressed as a percentage or aratio.The return on investment formula:Return on investment is a very popular metric because of its versatility and simplicity. That is, if an investment does not have a positive ROI, or if there are other opportunities with a higher ROI,then the investment should be not be undertaken.
resent value analysis is a method of evaluation capital investment using discounting arithmetic todetermine whether or not they will provide a satisfactory return. Its measure all relevant cash flowassociated with a project over its whole life and adjust these occurring in future year to presentvalue by discounting at a rate called discount rate.