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BCS Exam BAP18 Topic 9 Question 50 Discussion
Topic #: 9
A business case is being created for a new, automated auditing system that will improve the IT department's ability to record and monitor all the computing devices used across the organisation.
The sponsor of the project is keen to get a better idea of the financial implications of the project and has asked for the simplest calculation possible. This calculation should consider the tangible costs and tangible benefits of the project, as well as showing when it will have saved the department as much as it has cost.
Which of the following investment appraisal calculations has the sponsor asked for?
The payback calculation is a simple investment appraisal calculation that looks at the time it takes to pay back the money invested in a project. It looks at the total cost of the project and compares it to the expected cash flow from the project. The payback period is calculated by dividing the total cost by the expected cash flow. This calculation allows the sponsor to determine when the project will have saved the department as much as it has cost.
For example, if the total cost of the project is $100,000 and the expected cash flow from the project is $20,000 per year, then the payback period is 5 years. This means that after 5 years, the project will have saved the department as much as it has cost. Therefore, the payback calculation is the simplest calculation possible for the sponsor to get a better idea of the financial implications of the project.
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