IT policy and strategy

BUDGET TOOL

Jimmy Beans Wool
Technology Budgeting Tool
8/8/23
Company Data
Required rate of return	10%
Tax rate	25%
Initial Investment	YEAR	1	2	3
Hardware costs (e.g., servers, networking hardware, PC upgrades)	$5,000
Purchased software costs / licenses (e.g., e-commerce, ERP, CRM software)	$1,500
Development costs (e.g., systems design and configuration / development)	$2,000
Training costs (e.g., develop and conduct initial training)	$3,000
Conversion costs (e.g., initial data conversion from existing systems being replaced)	$500
Marketing	$2,000
[Other initial investments]	$1,000
Total Initial Investments	$15,000
Benefits from Technology Strategy	YEAR	1	2	3
Increased sales and revenue		$13,000	$20,000	$30,000
Reduced personnel costs		$3,900	$2,000	$1,000
Reduced product costs		$1,600	$1,000	$800
Reduced distribution costs		$2,000	$1,000	$800
Reduced advertising and marketing costs		$1,800	$2,200	$3,000
Total Benefits		$22,300	$26,200	$35,600
Costs (Excluding Initial Capital Investments)	YEAR	1	2	3
Depreciation on capital expenditures (calculation uses three-year period)		$4,000	$5,000	$5,000
Software licensing fees		$0	$500	$500
Ongoing user support and training (e.g., help desk and training personnel)		$0	$1,500	$2,000
Ongoing systems support (e.g., IT maintenance)		$0	$3,000	$3,000
Hosting / Cloud computing		$2,000	$2,000	$2,500
General and administrative		$1,000	$1,500	$2,000
[Other costs]		$1,000	$1,500	$2,000
Total Costs		$8,000	$15,000	$17,000
Totals	YEAR	1	2	3
Net Benefits (Costs)		$11,633	$11,200	$18,600
Tax		$2,908	$2,800	$4,650
Value after tax		$7,143	$8,400	$13,950
Depreciation added back		$4,000	$5,000	$5,000
Cash flow	($15,000)	$11,143	$13,400	$18,950
Cumulative cash flow	($15,000)	($3,857)	$9,543	$28,493
Evaluation Metrics
Net present value (NPV)	$20,442
Internal rate of return (IRR)	70.30%
Payback period (in years)	1.29
Three-year total ROI: (total benefits before taxes - total costs)/total costs	110.25%