A Company is considering installation of a new computer system using a special written software to streamline the business’s warehousing operations. The initial outlay on the project will be substantial. The Company estimates that payments to the software house will be TZS.10,000,000 immediately, with a further TZS.7,500,000 in a year’s time. New equipment’s installation and testing costs will amount to TZS.14,800,000 during the first year (it should be assumed for appraisal purposes that these costs arise at time 1). The plan is that the new system should go live in one year’s time. Because of the increased efficiency of the operation, the Company expects substantial increases in sales. The net cash flows forecast from the installation of the new systems are as follows:
Question
BodMas
Time (year) 2 3 4 ...