1. Which projects would you recommend Handstar pursue based on the NPV approach?

Hour Rate: - $ 52.00

Discount Rate: - 12%

Developing hours available = 2500 * 4 = 10,000 Hour

Srno Project Development Estimated revenue for 1St

. Product Type Hours year
1 Calender+Email update 1250 750,000
2 Expense report update 400 250,000
Portfolio
3 Tracking update 750 500,000
4 Spreadsheet New Project 2500 1,000,000
5 Web Browser New Project 1875 2,500,000
6 Trip Planner New Project 6250 1,300,000
13025 6,300,000

Now Total development hour are = 10,000, if we include trip planner its going above 10,000 i.e.,
13025 hence we must drop trip planner so total hours required are 6,775. So, we will carry out
1,2,3,4,5.

Therefore, excluding Trip Planner,

Total Development Hours = 6,775

Total NPV =15,818,057.14.

Selecting Project to Maximize NPV

Integrated Updates Portfolio Spreadsheet Web Trip

Factors Calander Expn Return Tracker Program Browser Planner
Hours 1250 400 750 2500 1875 6250
Cost -65,000 -20,800 -39,000 -130,000 -97,500 -325,000
Growth -10% 5% 5% 10% 15% 5%
1st year 2,500,00 1,300,00
revenue 750,000 250,000 500,000 1,000,000 0 0
2nd year 675,000 262,500 525,000 1,100,000 2,875,00 1,365,00

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 revenue 0 0
3rd year 3,306,25 1,433,25
revenue 607,500 275,625 551,250 1,210,000 0 0
8,681,25 4,098,25
Total Revenue 2,032,500 788,125 1,576,250 3,310,000 0 0
Present value 2,232,14 1,160,71
1st year 669,643 223,214 446,429 892,857 3 4
Present value 2,291,93 1,099,17
2nd year 538,106 209,263 418,527 876,913 2 0
Preset value 2,353,32 1,020,15
3rd year 432,407 196,184 329,369 861,254 3 9
$1,575,155. $1,218,32 $2,501,025.0 $6,779,8 $2,944,0
NPV 00 $607,863.00 4.00 0 99.00 43.00
NPV ranking 4 6 5 3 1 2
Discount Rate 12%

Using NPV approach will select Web browser 1st then Trip planner 2nd, then rank 4th and rank 6th
as we only have 10,000 working hours.

The set of projects1, 2, 3, 4, & 5 have a higher combined NPV and lower development time than
the other set of projects 1, 2, 4 & 6. Thus, the set of projects 1, 2, 3, 4 & 5 should be selected.

1. Assume the founders weigh a project's NPV twice as much as both obtaining/retaining a
leadership position and making use of the Internet. Use the weighted factor scoring
method to rank these projects. Which projects would you recommend Handstar pursue?

Weighting Criteria

NPV: - 0.50 (Twice of Leadership and Internet).

Leadership: - 0.25

Internet Usage: - 0.25

Internet usage/ leadership factor (out of 100)

High = 100

Moderate = 66.76

Low = 33.33

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 Zero = 0

Sr Proje Develop Leaders Leader Intern Intern NPV Ra

n Produc ct ment hip ship et et Facto NPV Net nki
o. t Type Hours Factor Score Factor Score r Score Score ng
Calend 1,575 20.16 51.16
er+Ema upda Modera Moder ,155. 0296 6765
1 il te 1250 te 66.67 ate 66.67 00 34 45 4
Expens 47.03
e upda 607,8 6660
2 report te 400 High 100 Low 33.33 62 8 77 5
Portfoli
o 15.59 60.75
Trackin upda Moder 1,218 3241 4413
3 g te 750 High 100 ate 66.67 ,324 86 95 3
New 32.01 32.89
Spreads Proje Modera 2,501 0440 3480
4 heet ct 2500 te 66.67 Zero 0 ,025 34 11 6
Web New 86.77 73.36
Browse Proje 6,779 5443 8481
5 r ct 1875 Low 33.33 High 100 ,899 05 02 1
New 2,944 37.68 57.00
Trip Proje ,043. 0596 3532
6 Planner ct 6250 Low 33.33 High 100 00 08 03 2

Using Weighted factor scoring Method, we will select Trip planner 2st, 3rd Portfolio tracking,
Spread sheet 4th and last 5th Expense report. Ranking of project selection is specified on above
table.

Total working Hours = 8,650

Total NPV = $ 6,345,384.52

2. In your opinion is hiring an additional software development engineer justified?

Ans. Yes, we think hiring an additional software development engineer is justified because they
have a good idea of what to do with the software and how long it would take to develop the
software and how much money they would make the business plan for the software projects is
developed good. By hiring an additional software development engineer Handstar will bring new

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 ideas to the company, also he or she would be able to recognize the trends in terms of technology
so Handstar can start working towards those trends and increase their revenues.

Product Project Type Development Hours Net Score Ranking

Calender+Email update 1250 51.16 4
Expense report update 400 47.03 5
Portfolio
Tracking update 750 60.75 3
Spreadsheet New Project 2500 32.89 6
Web Browser New Project 1875 73.36 1
Trip Planner New Project 6250 57 2

Developing hours available = 2500 * 4 = 10,000 Hour

Hence, we cannot develop Trip Planner as it requires 6250 development hours

Total Development hours required Including Trip planner is 13025 we have 10,000.

For project rank 1,2,3,4,5.

Total working hours (Removing Spreadsheet project) = 10,525. Hence, we need to add one

Software development engineer.

Therefore, New development hour will be 2,500*5 = 12,500 Hours

Total Development cost = 10,525

Total NPV = $ 13,125,283.22.

Additional Cost = $ 130,000

Additional NPV = $ 6,779,898.70

Net Profit = $ 6,649,898.70

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