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(PDF) A Critical Analysis of Decision Support Systems Research

   

Added on  2021-04-17

12 Pages2280 Words74 Views
Environmental Science
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DECISION SUPPORT SYSTEM:NAMEDATE
(PDF) A Critical Analysis of Decision Support Systems Research_1

Part AQuestionOneIntroductionMaking production/ manufacturing decisions need to be done in a logical way, with justifications for a given investment determined, using various tools. In this case, YourCloud Pty company, located in Brisbane, is interested in developing a new responsive cloud software that analysts say has a Net Present Value (NPV) of $ two million. Market conditions have created some bad software investment decisions, hence the caution in deciding ot produce the cloud based software. This section uses Decision Support Systems (DSS) to determine the viability of the proposed projects. In computing the NPV for the coud based software, the following factors are taken into consideration;The annual cash flows from the production, which are determined by considering the:Any overhead costs/ fixed costs per year The cost of producing the products The selling price for the products The initial investment is also considered, along with the discount rateIn determining the NPV, the general formula NPV = C x {(1 - (1 + R)-T) / R} − Initial InvestmentWhere C represents expected cash flows per period, T is the number of periods, and R the required rate of return. In the valuation of equity investments, the required rate of return is the discount rate and so the value used is 12%. Before determining the NPV, the cash flows for each year are determined; This is done by subtracting the expenses, including overheads, from the expected sales for each year, factoring in the annual growth in sales from annual growth in demand. In the year zero, only the initial investent and the fixed costs are considered in determining the cash flows, while in subsequent years, the market demand plus the fixed costs are considered. These were computed in a spreadsheet, and then the NPV determined using the softwareYearCash Flows (Net)0-1960000110430000214280000316453500418953025
(PDF) A Critical Analysis of Decision Support Systems Research_2

The NPV was established to be $2,958,025.58DSSTheDSSusesanAHP
(PDF) A Critical Analysis of Decision Support Systems Research_3

(Analytical Hierarchy Process) In determining whether to go ahead with the new project, the cash flows were evlautaed; whether they are positive or negative, and then used to compute the NPV. The NPV is foud to be positive and higher than the initial investment plus the overhead costs. This implies that the project is viable and based on the DSS, should be undertaken. Based on the findings, the claim on the NPV being above $ two million is correct as the calculations show an NPV value of $2,958,025.58, which is above the analysts level of $ 2,000,000, meaning discounted to the present rate, the value of the project is high relative to the investment and overhead costs. As such, the analysts figure is correctQuestion TwoThe management should proceed with the project; this is because the chance that the NPV for the cloud software being less than $ 1000,000 is less than 20%; the calculations from the Monte Carlo Analysis show that the NPV at the worst case scenario will be $ 1,300,000. Question Three
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