Handstar Inc.

NPV Approach

Hour rate $52.00

Discount rate 12%

Estimated revenue
Sr No. Product Project Type Development Hours for 1st year

1 Calendar + Email Update 1250 $ 750,000.00

2 Expense report Update 400 $ 250,000.00
3 Portfolio tracking Update 750 $ 500,000.00
4 Spreadsheet New Project 2500 $ 1,000,000.00
5 Web Browser New Project 1875 $ 2,500,000.00
6 Trip Planner New Project 6250 $ 1,300,000.00
6775
Development Hours Available = 2,500*4 = 10,000 Hour
Selecting Projects to Maximize NPV
Projects Selected(Highlighted in Blue): Project Ranked - 1,3,4,5,6
Total Development Hours= 6,775
Total NPV = $ 12,682,264.76
 Revenue
Growth rate Cost Present Value
Year 1 Year 2 Year 3 of Revenue
0.90 $ 65,000.00 $ 750,000.00 $ 675,000.00 $ 607,500.00 $ 1,640,155.23
1.05 $ 20,800.00 $ 250,000.00 $ 262,500.00 $ 275,625.00 $ 628,662.11
1.05 $ 39,000.00 $ 500,000.00 $ 525,000.00 $ 551,250.00 $ 1,257,324.22
1.10 $ 130,000.00 $ 1,000,000.00 $ 1,100,000.00 $ 1,210,000.00 $ 2,631,024.51
1.15 $ 97,500.00 $ 2,500,000.00 $ 2,875,000.00 $ 3,306,250.00 $ 6,877,398.70
1.05 $ 325,000.00 $ 1,300,000.00 $ 1,365,000.00 $ 1,433,250.00 $ 3,269,042.97
 NPV Ranking

$ 1,575,155.23 4
$ 607,862.11 6
$ 1,218,324.22 5
$ 2,501,024.51 3
$ 6,779,898.70 1
$ 2,944,042.97 2
Handstar Inc. Weighted Average Approach

Internet Usage/Leadership Factor Weightage

(Out of 100)
High 100 NPV 0.5
Moderate 66.67 Leadership 0.25
Low 33.33 Internet Use 0.25
Zero 0

Development Leadership position Internet Use

S. No. Project type Project Hours Factor Score Factor
1 Update Calendar + Email 1250 Moderate 66.67 Moderate
2 Update Expense report 400 High 100.00 Low
3 Update Portfolio tracking 750 High 100.00 Moderate
4 New Spreadsheet 2500 Moderate 66.67 Zero
5 New Web Browser 1875 Low 33.33 High
6 New Trip Planner 6250 Low 33.33 High

Projects Selected(Highlighted in Blue): Project Ranked - 2,3,4,5

Total Development Hours= 8,650
Total NPV = $ 6,345,384.52

1. Considering the assumption that, total development hours are calculated with the factor that
each developer's efficiency is 90% 2.
Irrespective of rankings, the update projects will be taken first and the new projects will be
taken based on ranking
Internet Use NPV Score
Net Score Ranking
Score NPV Score
66.67 $ 1,575,155.23 23.23 44.95 4
33.33 $ 607,862.11 8.97 37.82 5
66.67 $ 1,218,324.22 17.97 50.65 3
0.00 $ 2,501,024.51 36.89 35.11 6
100.00 $ 6,779,898.70 100.00 83.33 1
100.00 $ 2,944,042.97 43.42 55.04 2
Handstar Inc.

NPV Approach

Development
Sr No. Product Project Type NPV Ranking
Hours
1 Calendar + Email Update 1250 $ 1,575,155.23 4
2 Expense report Update 400 $ 607,862.11 6
3 Portfolio tracking Update 750 $ 1,218,324.22 5
4 Spreadsheet New Project 2500 $ 2,501,024.51 3
5 Web Browser New Project 1875 $ 6,779,898.70 1
6 Trip Planner New Project 6250 $ 2,944,042.97 2

Development Hours Available = 2,500*5 = 12,500 Hour

Projects Selected(Highlighted in Blue): Project Ranked - 1,2,4,5,6
Total Development Hours= 10,525
Total NPV = $ 13,125,283.22

Additional Cost = $ 130,000.00

Additional NPV = $ 443,018.46
Net Profit = $ 313,018.46 >0

Hire additional Software development Engineer

1. Considering the assumption that, total development hours are calculated with the factor that
each developer's efficiency is 90%
2. Irrespective of rankings, the update projects will be taken first and the new projects will be
taken based on ranking
 Weighted Avg. Approach

Sr No. Product Project Type Development Hours Net Score Ranking

1 Calendar + Email Update 1250 44.95 4

2 Expense report Update 400 37.82 5
3 Portfolio tracking Update 750 50.65 3
4 Spreadsheet New Project 2500 35.11 6
5 Web Browser New Project 1875 83.33 1
6 Trip Planner New Project 6250 55.04 2

Development Hours Available = 2,500*5 = 12,500 Hour

Projects Selected(Highlighted in Blue): Project Ranked - 1,2,3,4,5
Total Development Hours= 10,525
Total NPV = $ 13,125,283.22

Additional Cost = $ 130,000.00

Additional NPV = $ 6,779,898.70
Net Profit = $ 6,649,898.70 >0

Hire additional Software development Engineer