Response to case study scenario 2
My advice will be to continue the project with external vendor. Where it will cost more but save timing and possibility to finish the project on time. End of first year company revenue also increase by £ 90,000. If the project going do in house there also 15 % probability to fail the project in that situation project will not implements. Working throw decision tree the Present Value is 29.16 % and Net Present Value is approximately 18.531.
Decision tree
Present Value
PV=(1+R)N
(1+0.085)1=(1+W)2
√1.085=1+w
=0.2916
=29.16%
Net Present Value
-£30 6 months
£90 18 months
−30/(1+0.291)+90/(1+0.296)3
NPV=18.531
