Systems Analysis And Desig, 10th Edition Solution Manual

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Systems Analysis and Design, Tenth EditionEnd of Chapter SolutionsToolkitExercisessQuestions1.What is a corporate culture, and why is it important? Describe the culture atabusinesswhere you have been employed.A corporate culture is the set of beliefs, rules, traditions, values, and attitudes that define acompany and influence its way of doing business. To be successful, a systems analyst mustunderstand, and work within, the corporate culture. For example, if you speak to a groupin a company that encourages a highly participative style, you might want to solicitfeedback, invite audience comments, or conduct a poll during your presentation. Similarly,if the organization or group is very formal, or very informal, you might want to adjust yourstyle accordingly.(Page565)2.Mention five specific techniques you can use to improve your written documents.As the Toolkit suggests, students who have not taken a writing course should considerdoing so. The textbook offers 10 specific suggestions for better-written documents, asfollows:a.Know your audience. If you are writing for nontechnical readers, use terms thatreaders will understand.b.Use the active voice wheneverpossible. For example, the active voice sentence “Tomdesigned the system,” is better than, “The system was designed by Tom,” which is anexample of the passive voice.c.Keep your writing concise and well organized. Use one paragraph to convey a singleidea.d.Use an appropriate style. For example, use a conversational tone in informaldocuments and a business tone in formal documents.e.Use lists. When you must enumerate a number of subtopics related to the same topic,lists are an organized way to present them.f.Use short, easy-to-understand words. Your objective is not to impress your audiencewith the size of your vocabulary.g.Avoid repeating the same word too often. Use a thesaurus to locate synonyms forfrequently repeated words. Many word processing programs include a thesaurus andother tools to help you write better.

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h.Check your spelling. You can use the spell checker in your word processing program tocheck your spelling, but remember that a spell checker is a tool that identifies onlywords that do not appear in the program’s dictionary. For example, a spell checkerwill not identify instances when you use the word “their,” instead of the word “there.”i.Check your grammar. Most word processing programs include a grammar checker,which is a tool that can detect usage problems and offer suggestions. When you use agrammar checker, you can set various options to match the level and style of thewriting and to highlight or ignore certain types of usage. For example, you can set thegrammar checker in Microsoft Word to check grammar rules only, or you canconfigure it to check writing style, including gender-specific words, sentence fragments,and passive sentencesj.Review your work carefully. Then double-check it for spelling, grammatical, andtypographical mistakes. If possible, ask a colleague to proofread your work andsuggest.(Pages565-566)3.What techniques can help e-mail communications? Provide specific examples.Students should realize that most companies now use e-mail as the standard form of writtencorrespondence. E-mail usually is less formal than other written communication, but goodgrammar, spelling, and clear writing always are important. Remind students that thingssaid might be forgotten in a short time, but things written—with our name on them—might be around for a long, long, time.Although e-mail usually is more conversational, point out that e-mail messages often areforwarded to other recipients or groups, and they are as important as any other form ofwritten communication. If you are a frequent e-mail user, you can create distribution liststhat include names of recipients and their e-mail addresses. Many e-mail programs useformatting features such as bold, italic, and underlining, and spell check your messagesbefore you send them.(Pages566-567)4.Create a one-page document with at least five grammatical errors. Then run theMicrosoftWord grammar checker and describe the results.This should be easy and fun.If students need some examples to get started, you can suggestcommon errorssuch as:Variations of to, too, and twoConfusion between that and whichMisuse of its and it’sImproper use of their and there(Page566)5.When preparing an oral presentation, what six tasks should you perform?When preparing an oralpresentation, you must define the audience, define the objectivesfor your presentation, organize the presentation, define any technical terms you will use,and prepare your presentation aids. After you have done these things, you must practice,practice, and practice some more.(Page572-573)6.When you organize a presentation, what three stages do you plan?You should plan your presentation in three stages: an introduction to let the audience know

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who you are and the purpose of the presentation; the delivery of the information in alogical, understandable manner; and a summation that recaps the main points and asks forquestions.(Page573)7.Why are visual aids important? Give at least three examples of different types ofvisualaids, and explain how you would use each type in a presentation.Visual aids are important because we learn best by what we see. Visual aids help theaudience follow the logic of your presentation, hold their attention, and can directaudience attention away from you, which is helpful if you are nervous during thepresentation.Students might suggest a variety of specific situations, but three basic examples are asfollows:a.A bulleted list of important points. This will serve as an agenda and will help keep youon track during the presentation.b.Flip charts, overhead transparencies, slides, films, and videotapes. These can increaseaudience interest and highlight your key points.c.Presentation graphics slides with sound and animation. You can use special effects to“dress up” your presentation, introduce some humor or a change of pace, or deliver apowerful, dynamic communication.(Page573)8.Based on your own experience, what tends to make a PowerPoint presentationstronger orweaker? Provide specific examples.Answers will vary. Hopefully, students will mention many of the tips and guidelinesdescribed in the text material. It would beinteresting to go further, and ask your classabout actual events, disruptions, or surprises that they saw as viewers.(Pages 573-574)9.Name three specific strategies you can use if you get nervous during a presentation.The most important thing is to try and control the environment, instead of letting it controlyou. If you are most nervous when the audience is looking at you, use visual aids to directtheir attention away. If yourhandsshake, do not hold your notes. If you are delivering acomputer slide show, use the keyboard instead of the mouse. Try to speak in a strong, clearvoice, and not to let your nervousness distract you.(Page576)10.Why is practice so important when preparing a presentation? Provide a specificexamplefrom your own experience.There are three ways to become a better speaker: practice, practice,andpractice. If yourehearse your presentation, you will gain confidence, get a better idea of timing, and beless likely to need a script or detailed notes. With practice, your presentation will be morespontaneous and your audience will be more interested in what you have to say when youare not reading it from a set of notes.(Pages575; 577)

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Discussion Topics1.Most people agree thatbusiness e-mail can be more conversational than formalwrittendocuments, but even e-mail has its limits. As a manager, what guidancewould you givepeople regarding e-mail style and usage?Answers will be influenced by the student’s personal experience with e-mail, especially inbusiness situations. Social e-mail has developed its own usage, abbreviations, and slang,such as “btw” that stands for “by the way” and the use of emoticons and smiley faces. In abusiness situation, these usages might or might not be appropriate. Just as dress codesvary from company to company, so do e-mail usage norms.It should be interesting to have students explain and defend what they see as anappropriate set of rules. It is important for students to know that, as employees, they arejudged by the written communications they send. For this reason, all communications,including e-mail, should be carefully spell checked and have a professional appearance.2.Is it possible to overcommunicate? For example, in Chapter 4 you learned toavoid leadingquestions, which might suggest an answer. Can you think of otherexamples, likenewspaper headlines, where “less is more”?Students should be able to think of many examples. To get the ball rolling, you mightsuggest examples such asgiving clear, concise directions to a lost traveler; preparingexecutive summaries for a busy manager; and writing a slogan for a bumper sticker. In awell-known example, a person says “I asked him what time it was, and he explained how tobuild a clock.”3.Many articles stress the importance of body language. Think of examples whereyounoticed a person’s body language. Did it relate to something they were tryingtocommunicate—or something they were trying not to communicate?Many studies have been done on this topic, and you might want to use some examplesavailable on the Internet. For example, an interesting site that offers information andinsights into non-verbal communication is available at:http://changingminds.org/techniques/body/body_language.htm.4.Should e-mail monitoring by an employer always be permissible, never permissible,ordoes the answer depend on specific factors? If so, what are they?Students typically have their own views on this topic, but it might be interesting to havethem perform some Internet research and be exposed to various opinions that can bediscussed and analyzed in class. In recent years, news accounts have described varioussituations where employers monitored employee e-mail and Internet usage. In some cases,employees were disciplined or terminated. To many students, a critical factor will bewhether or not the employees were forewarned of the monitoring practice. In any case, thistopic should make for a lively debate.Projects1.The Elements of Styleby William Strunk, Jr. and E. B. White is a popular referencemanualfor proper English usage. The book identifies many words and phrasesthat arecommonlymisused, including between and among, affect and effect, differentfrom and different than,

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like and as, and infer and imply. ReviewTheElements of Styleor another source, andexplain how these words should be used.This project will be an eye-opener for students who are unaware of the proper usage. Youcould introduce the assignment with a list that mixes correct and incorrect examples, usingterms other than the ones listed above. Some additional examples might include “its and“it’s,” “who” and “whom,” and “that” and “which.”Also see the suggested answer toQuestion 4 above.2.Using Microsoft PowerPoint or another program, prepare a presentation on“How toPrepare an Effective Slide Presentation.”Assume that your audience isfamiliar withpresentation software, but has no formal training.Students should be able create aneffective presentationof the material on pages572-575.Remind students that preparing an effective slide presentation requires considerable timeand effort. Also remind them that the first step (and perhaps the most important) is toprepare an overall outline that will be the foundation of the presentation. It is essential tofocus on the content and structure of your presentation before you consider visual issues.Other guidelines include the following:Remember that a fine line exists between providing too little information and too much.Display one topic per slide, and try to follow the rule often called the 7by 7 rule: nomore than seven items per slide, and no more than seven words per item. Somepresenters believe that a 6 by 6 rule is even more effective.When displaying a list of items, consider using a series of slides to add each pointdependently, especially if you want to focus attention on the item being discussed.Use bullets rather than numbers, unless you are showing a specific sequence or order.Choose easily readable fonts. Use sans serif styles, such as Arial, for all body text. Ifyou do use a serif style (such as Times Roman) apply it only intitles.Use appropriate point sizes for titles and body text. Your goal is to prepare slides thatare readable and visually attractive. Although point size selection depends onindividual judgment and experience, here are some suggestions to get you started: fortitles, try either 36-or 40-point fonts; for body text, 32-or 24-point fonts usually workwell.Select special effects carefully—too many graphics, colors, sounds, or other specialeffects will distract your audience.You can include tables or graphics, but keep them simple and easy to understand. Also,you can use a special effect, such as bold, italics, underlining, or a different color, tohighlight an important word or phrase.Strive for a consistent look and feel among your slides, and position visual elements inthe same place on each slide. You should use a master template to assure uniformity.Choose colors carefully, and keep them consistent. Light letters on a dark backgroundare easiest to read.Be sure to check spelling and grammar!During the presentation, do not read your slides to the audience. They can read theslides on their own. Your slide presentation is an outline that provides structure andemphasis—it is not the presentation itself.

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3.As a training manual writer, choose a simple hardware or software task and writea two-orthree-paragraph description of how to perform the task. Then use yourword processingsoftware to check the readability statistics. Try to keep theFlesch Reading Ease scoreabove 60 and theFlesch-Kincaid Grade Level score to8.0 or less.Many students will not have experience in “writing down” to a certain level. It would behelpful to provide students with an example of an overly complex paragraph that fails thereadability test—then show them how to edit it to meet the objectives. You can show thisby using the following examples:Example 1:“When it is essential to interact effectively with your counterparts, you shouldattempt to envision their understanding of the issues.”Example 2:“When you need to work well with other people, try to see issues from theirviewpoint.”Microsoft suggests that for most standard documents, you should aim for a FleschReading Ease Score of at least 60-70, and a grade level of no more than 7.0 to 8.0.The first example has a Flesch Reading Ease Score of 34.2 and a grade level of 12, whichis too high for most training manuals. The second example, which says essentially the samething, has a Flesch Reading Ease Score of 84.8 and was assessed at grade level 5.4, whichshould make it easy for anyone to read and understand.4.View at least three examples of public speaking. You can investigate TV networknewsbroadcasts, C-SPAN, or any other source. Describe each speaker’s gestures,expressions,voice levels, inflections, timing, eye contact, and effectiveness.You could allow students free choice as to the speakers, or you (or they) could nominatepeople and have a drawing to assign specific students to specific speakers. In any case, theobjective is tohave students identify certain characteristics and rate the effectiveness.Television newscasts are especially interesting when they involve the interaction among ateam of newscasters. Or, you can allow examples from movies or TV shows. For example,in the views of many observers and delighted fans, Archie Bunker’s mannerisms, such asrolling his eyes when he was totally frustrated with Edith, spoke volumes.

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Systems Analysis and Design, Tenth EditionEnd of Chapter SolutionsToolkitExercisessQuestions1.Define CASE, CASE tools, and a CASE environment.CASEstands for computer-aided systems engineering.CASEtoolsare software programsthat system developers use to help them design and construct information systems. A CASEenvironment is more than a set of CASE tools—it includes any use of computer-basedsupport in the software development process.(Page582)2.Explain the difference between procedural and non-procedural languages.Procedural languages, such as COBOL, require a programmer to create code statementsfor each processing step. In contrast, modern languages such as C++ and Java are callednon-procedural, or event-driven, because instead of writing a series of dependentinstructions, a programmer defines the actions that the program must perform whencertain events occur.(Page585)3.Describe 4GLs and their characteristics.4GLs, or fourth-generation languages, are object-oriented programming languages(OOPL) that are especially valuable in implementing an object-oriented system design.4GLs are important components of a fourth-generation environment.(Page585)4.Define a repository, and explain its role in the systems development process.Arepositoryis a database that serves as a central storage location for all informationabout the system being developed. Once a data element has been defined in the repository,it can be accessed and used by processes and other information systems. For example, asales processing, accounts receivable, and shipping system all might require data aboutcustomers. After a CUSTOMER data element is entered in the repository, all three systemscan share a consistent, up-to-date definition. When you define a data element in therepository, you can assign a data type and format, a range of acceptable values, and one ormore aliases, or alternative names for data elements.(Page586)5.What are forward and reverse engineering tools, and how are they used?Forward engineering tools can translate business processes and functions intoapplications. Some CASE tools allow you to build the system either by editing objects andcode directly, or by modifying graphical representations such as DFDs and UMLdiagrams. Reverse engineering tools allow you to examine an existing application and

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break it down into a series of diagrams, structure charts, and, in some cases, source code.(Page587)6.Provide an example of an application generator and a screen generator.An application generator, also called a code generator, allows you to develop computerprograms rapidly by translating a logical model directly into code.For example,Telelogic’s Tau Modeler uses information stored in the data repository to generateapplications in languages such as Java, C++, and Visual Basic.A screen generator, or form painter, is an interactive tool that helps you design a custominterface, create screen forms, and handle data entry format and procedures. The screengenerator allows you to control how the screen will display captions, data fields, data, andother visual attributes. Modern CASE tools usually include a screen generator thatinteracts with the data dictionary.An example isGillani Software’s FourGen® CASE toolset, which includes a form painter and a code generator.(Pages 587-588)7.How is a report generator used, and what is a mock-up report?A report generator, also called a report writer, is a tool for designing formatted reportsrapidly. Using a report generator, you can modify a report easily at any stage of the designprocess. When you are satisfied with the report layout, the report writer creates a reportdefinition and program code that actually produces the report. You also can input samplefield values to create a mock-up report for users to review and approve.(Page588)8.Explain the concept of an integrated development environment and provide two examplesof IDEs.An integrated development environment (IDE) uses a built-in CASE tool that a softwarevendor includes to make it easier to plan, construct, and maintain a specific softwareproduct. Examples of IDEs include Oracle Designer and Visual Studio .NET.Oracle Designer, which is packaged with Oracle’s application software, models businessprocesses, data entities, and relationships—and can transform these models into designsthat generate complete applications. Microsoft’s Visual Studio .NET includes variousapplication development tools that are specifically designed to support Microsoft’s Web-based application development strategy.(Page589)9.Explain the concept of an application life cycle management environment and provide twoexamples of ALMs.Although no standarddefinition exists, ALM generally refers to a start-to-finish approachtoplanning, designing, developing, deploying, managing, and maintaininganinformationsystem. According to Microsoft, Visual Studio 2012 offers ALM toolsand processesthatcan help an organization speed up systems development andreduce costs.IBM alsostresses the ALM conceptusingRationalWorkbench®.IBM states that RationalWorkbench® spans systems engineering, project management, software development, andquality management.(Pages 589-590)10.What is the emerging role of object-oriented analysis and designmethods? Agile methods?Although structured analysis continues to be a dominant methodology, object-orientedanalysis and design (OOAD) is gaining popularity. Using an object-oriented approach, adeveloper creates objects called actors, which represent the human users who will interact

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with the system. This approach allows the developer to visualize a systemthroughthe eyesof the people who will work with it. A major trend toward objected-oriented languages hasspurred interest in O-O CASE tools, which can provide a seamless development sequencethat includes planning, analysis, design, and actual coding. Other attractive features of anO-O approach include modular design and reusable code that easily can be combined andreassembled into new components. This approach can provide cost reduction and fasterdevelopment times.The most recent trend is the popularity of agile methods. Chapter 11 includes a detaileddescription of an agile project, including the iterative cycles and the intense contactbetween developers and users. Agile developers use a wide range of modeling tools,including CASE tools. However, many agile teams find that simple whiteboard sketchingworks best for them, as shown in Figure TK 2-20. Although it is difficult to predict thefuture, it seems clear that CASE tools will continue to evolve and become more powerful.At the same time, system developers will sometimes choose simpler, low-tech methods andtechniques as modeling tools.(Pages 593-595)Discussion Topics1.Would asystems analyst be better off in a position where he or she works with anIDE, orwhere generic CASE tools are used? Explain your answer.Answers will vary. As the textbook points out, in a specific software environment, anintegrated development tool is highly effective because it is an integral part of the vendor’ssoftware package. Each IDE, however, is different and requires a learning curve and skillsthat might or might not be readily transferable. In contrast, non-specific CASE tools suchas Visible Analyst or System Architect can be used in any development environment. Giventhe dynamic changes in IT, a systems analyst should seek to learn as many developmentand CASE tools as possible.2.Visit the Web sites for Rational System Architect and Visible Analyst. If you couldchooseonly one of these products, which one would you select, and why?Both firms offer powerful, user-friendly CASE tools. You might suggest a common checklistfor product comparisons, including features, price, ease of learning, availability of onlinetutorials, price, and overall “look and feel.”3.If you were a programmer, would you prefer to work with procedural ornon-procedurallanguages? Explain your reasons.Answers will vary. Students with some programming experience may have personalreasons to support their answers; others will answer based on impressions they gain in thetextbook and in this part of the Toolkit. The textbook points out that traditional, procedurallanguages use structural rules to organize and control program execution, while non-procedural languages are essentially event-driven. Both types, however, require specificrules for syntax and coding.4.Some analysts believe that if the trend toward more powerful CASE tools continues,manytedious development tasks might be performed automatically. Is there alimit to thecapabilities of future CASE software? Could a complete informationsystem be designed

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by describing a business operation and specifying certaininputs and outputs? Explain youranswer.Given therapid pace of technology, it is wise never to say “never.”Currently, powerfultools such as Rational System Architect and Visible Analyst enable developers to constructworking modelsthat can serve as prototypesforanew system. Also consider the fact thattools such as Visible Analyst allow you to engage in strategic planning by creating a seriesof statementsand functional decomposition diagrams, which are explained as follows:Planning, Business PlanningFunctional decomposition diagrams (FDDs) give you the ability to do high-level planning of businessfunctionsdiagrammatically while concurrentlypopulating the repository. You can enter business functions (hereaftercalled simply functions) that you define onto diagrams and break themdown into successively finer gradations.At some point, one that is entirelyup to you, you can break down functions intoprocesses. These processesare semantically equal to the processes that appear on data flow diagrams.(Emphasisadded.)From where we already are, it might only be a short step to a CASE tool that could go froma strategic plan, to an FDD, to a set of processes, to application structure and code. Staytuned.Projects1.Search the Internet for a simple,user-friendly CASE tool that you would recommend foryour school’s computer lab. Visit the vendor’s site and learn all you can about the product.Write a brief report that describes your experience.You might want to provide a standard checklist of features for students to investigate. ManyCASE products offer demonstration versions, and students should be encouraged toexperiment with these if possible.2.Visit www.visual-paradigm.com. Locate and download the Community Edition, which isfree, or a 30-day trial edition. Experiment with the program and write a brief report thatdescribes your experience.Students should have no trouble locating and downloading the software. This project mightbe a good one for a group task, with members acting asareal-world evaluation team.3.Search the Internet and locate an example of a screen generator. Visit the vendor’s site andlearn all you can about the product. Write a brief report that describes your experience.Students can search the Internet using the phrase “screen generator” to locate examples ofproducts to investigate. You might want to provide a standard checklist of features forstudents to investigate. Some screen generators offer demonstration versions, and studentsshould be encouraged to experiment with these if possible.4.Go to the site shown in Figure TK B-8 on page 588 and learn more about Gillani’sFourGen CASE Tools. Write a brief report summarizing your findings.Answers will vary. Students should have no trouble learning about these products. LikeProject 2, this assignment might be a good one for a group task, with members acting as a

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real-world evaluation team. The instructor also might require a brief PowerPointpresentation, using the skills learned in Part A of the Systems Analyst’s Toolkit.

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Systems Analysis and Design, Tenth EditionEnd of Chapter SolutionsToolkitExercisessQuestions1.How do you know if a project is economically feasible? Why is TCOimportant?A project is economically feasible if the future benefits outweigh the estimated costs ofdeveloping or acquiring the new system. A systems analyst determines economic feasibilityby calculating a project’s costs and benefits. The analyst then uses various tools andtechniques to perform a cost-benefit analysis, which often is called a feasibility study.A project’s total cost of ownership (TCO) includes ongoing support and maintenancecosts, as wellas acquisition costs. It is important to stress that after-acquisition costs aresubstantial, and often are under-estimated. For example, HP found that the majority oftotal IT costs occur after the purchase, and that nearly half the costs lie outside the ITdepartment’s budget. HP also noted that the most significant cost factor is user support,including peer-to-peer assistance that rarely is documented or measured.(Page 602)2.Describe each cost classification and include two examples.Costs can be classified as tangible or intangible, direct or indirect, fixed or variable, anddevelopmental or operational.Tangible costs have a specific dollar value. Examples of tangible costs include employeesalaries and hardware. Intangible costs have a dollar value that cannot be calculatedeasily. Examples of intangible costs include customer dissatisfaction and reducedinformation availability. If an analyst examines an intangible cost carefully, it might bepossible to estimate a dollar value. Direct costs are costs associated with the developmentof a specific system. Examples of direct costs include the salaries of project team memberswho develop the new system. In contrast, indirect costs, such as the monthly rental for acopy machine or insurance expense, cannot be attributed to the development of aparticular system. Indirect costs also are called overhead expenses. Fixed costs arerelatively constant and do not depend on a level of activity or effort. Fixed costs mightinclude salaries and hardware rental charges. Variable costs, such as the costs of printerpaper and supplies, depend on a level of activity. Developmental costs are incurred whenthe system first is developed or acquired, such as salaries. Operational costs are incurredafter the system is implemented and continue while the system is in use. Examples includesystem maintenance, ongoing training, and annual software license fees.

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Costs can fall into more than one category. For example, overtime pay for clerical helpduring the systems analysis phase might be developmental, variable, and direct. A monthlyfee for maintaining the company’s Web site might be operational, fixed, and indirect.(Pages 603-604)3.What are four chargeback methods? In your view, is one more “fair” than another?A chargeback method is a method of allocating theindirect costs of running the ITdepartment. Most organizations adopt one of four chargeback approaches: no charge;fixed charge; variable charge based on resource usage; or variable charge based onvolume.a.The no charge approach treats IT department services as a necessary cost of doingbusiness that benefits the entire company, rather than a particular department.b.The fixed charge method divides indirect IT costs among all the other departments inthe form of a fixed monthly charge.c.The method called variable charge based on resource usage assigns costs based on theresources used by an information system. Resources might include CPU time, printeruse, or a combination of similar factors.With a variable charge based on volume approach, the indirect IT department costs areallocated to other departments based on user-oriented activity, such as the number oftransactions.There is no single answer to the second part of the question, regarding what is “fair.”Student answers might depend on their own business experience (or lack of it). In any case,the reasoning is the important thing, and whether the student has a grasp of the differences.(Page604)4.Describe each benefit classification, and include two examples.Benefits are classified the same way as costs—tangible or intangible, fixed or variable,and direct or indirect—and the same examples would apply. For instance, costs caninclude salaries, equipment, and other resources, and a reduction in these areas can becalculated as a benefit. Benefits also can be classified as positive benefits or cost-avoidance benefits. Positive benefits are increased revenues, lower costs, or improvedservices that can be attributed to the new information system. Examples of positive benefitsinclude reduced operating expenses, faster service to customers, and better inventorymanagement. Cost-avoidance benefits are expenses that would be necessary if the newsystem were not installed. Examples of cost-avoidance benefits include handling the workwith current staff instead of hiring more people, or not having to replace existing hardwareand software.(Page 605)5.What formula do you use to calculate the payback period?Payback analysis compares the cumulative costs and benefits of a proposed informationsystem to determine how long it will take for the system to pay for itself. This period of timeis called the payback period. Cumulative costs include developmental and operationalexpenses, and benefits include all tangible benefits.A payback period is the time it takes for the accumulated benefits of an informationsystem to equal the accumulated costs of developing and operating the system. You can use

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a chart or a spreadsheet to calculate the payback period. Either way, to calculate thepayback period, you must perform the following steps:1)Determine the initial development cost of the system.2)Estimate annual benefits.3)Determine annual operating costs.4)Find the payback period by comparing total development and operating costs to theaccumulated value of the benefits produced by the system.When using a graph, such as the exampleshown in Figure TKC-6on page 607, notethatthe payback period isnotthe point when current benefits equal current costs, where thetwo lines cross. Instead, the payback period comparesaccumulatedcosts and benefits. Ifyou graph current costs and benefits, the payback period corresponds to the time at whichthe areas under the two curves are equal. If you use a spreadsheet program to calculate thecumulative cost-benefit data, as shown in the examples in Figure TKC-8 on page 609, youcan estimate the point in time where the cumulative benefits exceed the cumulative costs.Note that year 0 (zero) is the year in which systems development begins.(Pages 606)6.What formula do you use to calculate ROI?Return on investment (ROI) is a percentage rate that measures profitability by comparingthe total net benefits (the return) received from a project to the total costs (the investment)of the project. Return on investment analysis considers costs and benefits over a longertime span than payback analysis, usually a period of five to seven years.In many organizations, projects must meet or exceed a minimum ROI, which is anestimate of the return that the firm would receive from investments, such astreasury bonds,or it can be a higher rate that the company requires for all new projects.ROI is calculated by using the formula: ROI = (Total Benefits–Total Costs) / Total Costs.For example, if Total Benefits = $213,000, and Total Costs = $181,000, then ROI would becalculated as follows:ROI = (Total Benefits–Total Costs) / Total CostsROI = (213,000–181,000) / 181,000ROI = 32,000 / 181,000ROI = 0.177ROI = 17.7%(Pages 610)7.Would the formulas in questions 5 and 6 also apply to heavyequipment, such as abulldozer? Why or why not?Payback and ROI analysis can be applied to any object or decision. For example, aconstructionfirm might analyze whether it would be less expensive to lease heavyequipment, rather than buying it. An individual might decide to lease a car, because he orshe found it would be less expensive, and so on. Theprinciplesare the same, and can beusedin any situation.(Pages 605-616)8.Define the termpresent value, and provide an example.Present value analysis is a technique that adjusts all future costs and benefits of a proposedinformation system to a current value, called the present value. By taking into account thetiming of costs and benefits, this technique compares all costs and benefit items on an

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equal yardstick, regardless of whether they occur now or five years from now. The presentvalue concept is based on the time value of money.To perform present value analysis, you must select a specified interest rate, called adiscount rate that represents a safe investment return that a company might expect frominvestments, such as bonds. Many companies require a rate of return that is even higherthan the discount rate because there is a degree of risk in any project compared toinvesting in a bond.When you time-adjust the cost and benefit figures, you multiply each of the projectedbenefits and costs by the proper present value factor, which depends on when the cost willbe incurred or the benefit will be received. Then you sum all the time-adjusted benefits andthe time-adjusted costs and calculate the net present value (NPV) of the project, which isthe total present value of the benefits minus the total present value of the costs.To help you perform present value analysis, adjustment factors for various interest ratesand various numbers of years are calculated and printed in tables called present valuetables.(Pages 612)9.What is the meaning of the phrase,time value of money?The phrase,time value of money, refers to the concept that a dollar that you have today isworth more than a dollar that you do not receive until one year from today. The value ofthe dollar you have now is greater because you can invest it and it will grow in valueduring the year. For example, if you receive $100 now, you might invest it in a mutual fundthat has an annual return of 8 percent. One year from now, you will have $108 instead of$100. The opposite also is true. If you must pay an expense, it will be less costly to pay it ayear from now.The time value of money concept is important to a systems analyst who must evaluate aproposed project that involves various costs and benefits that occur at future times. Whenthe analyst performs a present value analysis for the project, he or she is determining thetime value of money.(Page 612)10.Why is it difficult to assign a dollar figure to an intangible cost? Can it ever be done?Explain your answer, andprovide an example.Intangible costs are costs whose dollar value cannot be calculated easily. The cost ofcustomer dissatisfaction, lower employee morale, and reduced information availability areexamples of intangible costs. If the analyst examines an intangible item carefully, however,it sometimes is possible to estimate a dollar value. For example, users might dislike asystem because it is difficult to learn. Their dissatisfaction is an intangible cost, but if ittranslates into an increase in errors that must be corrected, you probably could assign atangible dollar cost. You should try to work with tangible costs whenever possible.(Page603)Discussion Topics1.Suppose your supervisor asks you to inflate the benefit figures for an IT proposal inorderto raise the priority of his or her favorite project. Would this be ethical? Does internal cost-benefit analysis affect company shareholders? Why or why not?Hopefully, students will be aware that public awareness of internal corporate accountinghas increased enormously in recent years. In a number of high-profile cases, corporate

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