San Diego School System

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Question 1: What is the appropriate discount rate for a government agency such as the San Diego City Schools? The appropriate discount rate should be determined from the federal risk free interest rate plus a small risk premium. The federal risk free interest rate in 2002 averaged 5.4%. Using this as the base, a government agency other than the federal government would need to add a small risk premium to compensate investors for the additionalrisk associated with being a school district instead of the federal government. San Diego would also need to add additional compensation to account for tax factors. With these factors in mind, San Diego should use a discount factor of approximately 7.8% (5.4% risk free rate + .5% risk premium + 1.9% tax compensation). Question 2: Calculate the ROI for San Diego’s ERP system. How can you quantify the soft benefits of the system and include them in the analysis? The soft benefits can be quantified through creative assumptions. These assumptions can come from experiences others had when implementing similar solutions or from drawing on similarities between other quantifiable benefits. Other principals compared their successful implementation like receiving an additional recruiting team, valued at $320K/year, this can be used as the estimate for Weiman’simproved recruiting due to the HR solution. Likewise, SDCS spent $400k/year on an internal audit team to provide access to HR data, this team could be disbanded with the implementation of an HR solution leading to a $400k/year benefit. Improved employee morale and productivity could be measured by a lower turnover rate, leading to lower training costs and recruitment costs, as well as higher output rates leading to lower clerical demands and improved service. {draw:frame}

Question 3: With the information you have access to, what should Weimann present and recommend at the board meeting? Specifically, would you recommend going forward with the HR system implementation?...
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