Please show work so that I understand calculations.
At Applebeeâs, Presto tablets by E la Carte are being installedat every table. In total, Applebeeâs will be purchasing 100,000tablets. Customers will be able to pay their food bill and orderappetizers and desserts using the tablets. The tablets are notreplacing wait staff; wait staff will still take the orders forentrees. Applebeeâs does not expect to reduce the work hours of itswait staff due to the tablet installation. By allowing customers topay whenever they want using the tablets, it is expected thatcustomers will be more satisfied, both with the ease and speed ofpayment. Diners are expected to get out the door faster with thenew tablet payment method.
The tablets will also function as jukeboxes at individual tablessince customers can select and pay for music tableside. Inaddition, customers will be able to play games on the tablets for asmall fee.The
music and game sales revenue will be split between Applebeeâsand E la Carte. In addition to the initial purchase price of thetablet hardware, Applebeeâs will be paying E la Carte asubscription fee for the use and upkeep of the tablets. Data andassumptions Use the following assumptions for data for thisexercise (all figures are assumptions only):
1. Each tablet has an initial purchase price of $250
2. The annual subscription fee per tablet is $50
3. Average revenue generated per day by each tablet is $1
4. Average number of days each tablet is in use each year is 360days
5. Additional annual IT costs incurred for tablet integrationinto Applebeeâs system is $225,000
6. The useful life of the tablets is four years.Ignoredepreciation and taxes.
Questions
1. Calculate the NPV of the investment in the tablets using adiscount rate of 6%.
2. Now calculate the NPV of the investment in the tablets usinga discount rate of 12%.
3. Does this investment in the tablets appear to be afinancially sound investment for Applebeeâs? Why or why not?
4. Recalculate the NPV of the investment now using an estimateduseful life for the tablets of three years instead of fouryears.
Assume a discount rate of 6%. What happens to the NPV
compared to when the useful life was assumed to be fouryears?
Does this investment still appear to be financially sound?
Please show work so that I understand calculations.
At Applebeeâs, Presto tablets by E la Carte are being installedat every table. In total, Applebeeâs will be purchasing 100,000tablets. Customers will be able to pay their food bill and orderappetizers and desserts using the tablets. The tablets are notreplacing wait staff; wait staff will still take the orders forentrees. Applebeeâs does not expect to reduce the work hours of itswait staff due to the tablet installation. By allowing customers topay whenever they want using the tablets, it is expected thatcustomers will be more satisfied, both with the ease and speed ofpayment. Diners are expected to get out the door faster with thenew tablet payment method.
The tablets will also function as jukeboxes at individual tablessince customers can select and pay for music tableside. Inaddition, customers will be able to play games on the tablets for asmall fee.The
music and game sales revenue will be split between Applebeeâsand E la Carte. In addition to the initial purchase price of thetablet hardware, Applebeeâs will be paying E la Carte asubscription fee for the use and upkeep of the tablets. Data andassumptions Use the following assumptions for data for thisexercise (all figures are assumptions only):
1. Each tablet has an initial purchase price of $250
2. The annual subscription fee per tablet is $50
3. Average revenue generated per day by each tablet is $1
4. Average number of days each tablet is in use each year is 360days
5. Additional annual IT costs incurred for tablet integrationinto Applebeeâs system is $225,000
6. The useful life of the tablets is four years.Ignoredepreciation and taxes.
Questions
1. Calculate the NPV of the investment in the tablets using adiscount rate of 6%.
2. Now calculate the NPV of the investment in the tablets usinga discount rate of 12%.
3. Does this investment in the tablets appear to be afinancially sound investment for Applebeeâs? Why or why not?
4. Recalculate the NPV of the investment now using an estimateduseful life for the tablets of three years instead of fouryears.
Assume a discount rate of 6%. What happens to the NPV
compared to when the useful life was assumed to be fouryears?
Does this investment still appear to be financially sound?
