Risk Tracking And Monitoring Discussion Paper
Informics, Inc. is building fifthgeneration software. The software quality initiatives will cost $$26,800$, and $$37,000$ is for maintenance of quality initiatives. The revenues from the initiatives: a. What is the cost of software quality? b. What is the software quality net present value? c. What is the return on software quality?
Expert Answer
This solution was written by a subject matter expert. It’s designed to help students like you learn core concepts. Risk Tracking And Monitoring Discussion Paper
Stepbystep
1st step
All steps
Answer only
Step 1/2
A)
we have software quality initiative= $26800
Maintenance of quality initiative= $ 37000
Year 0 = $22500
hence the total cost of software quality=
Total cost=26,800+37,000+22,500=86,300
Total cost = $86300.
 Explanation for step 1
Here we have also added the initial investment cost which is shown in negative figures.
Step 2/2
B) For NPV we require a discount rate, since discount rate is not given, let’s assume the rate to be 8%.
0

22500

1

5100

2

96250

3

96250

4

96250

5

96250

Rate

8%

NPV

2,77,400.19

return=(51,000+96,250+96,250+96,250+96,250−22,50022,500)×100=1,837.78
2) using the total cost
Return=(51,000+96,250+96,250+96,250+96,250−86,30086,300)×100=405.21
 Explanation for step 2
Return= (Gaininvestment)/investment)
Final answer
Answer 1)
total cost= $86300
Answer 2) NPV= $277400.19
Answer 3)
a) 1837.78%
b) 405.21%
Risk Tracking And Monitoring Discussion Paper