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A new IS project has been proposed that will produce not only cost savings but...

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Accounting

A new IS project has been proposed that will produce not only cost savings but also an increase in revenue. The initial costs to establish the system are estimated to be $500,000. The remaining cash flow data is presented in the following table? How would the rate of return change if the project delivered $50,000 in additional revenue and gen- erated cost savings of $25,000 in the first year?

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Year 1 Year 2 Year 3 Year 4 Year 5 Increased Revenue $0 $100 $150 $200 $250 $0 50 50 50 50 Cost Savings Depreciation $0 75 75 75 75 $500 Initial Expense Note: All amounts are in 000s

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