It has taken you weeks to put together the case for a new computer
system in your department. The existing one is a complete
waste of time. You acknowledge that a new system will
be costly, but when this is compared against the hours currently lost
every week trying to resolve problems, the decision is obvious. The
company is insistent that whenever a proposal is made for any major
project a full analysis of all the costs and benefits be prepared. In this
respect you have been extra vigilant. Not only have you managed to
identify and quantify every potential cost associated with the project,
you have also provided a schedule detailing all the problems you
believe could potentially arise and the various contingency plans you
have in place to deal with them. No matter how you look at it, the cost
savings over the next few years will definitely outweigh the costs – this
is surely a done deal!
For the past two weeks the finance department has been poring
over your figures and this is the morning you receive their decision.
The good news is that they accept your figures as showing that the
future savings will clearly outweigh the costs. Then comes the bad
news. The project is to be rejected for two reasons. As they so eloquently
put it: ‘There is no doubt that the project would increase the
profits of the company. However, it has failed the IRR hurdle and the
payback period is excessive. As a result, there is no alternative but to
reject this proposal
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