PizzaRush, which is located in the general Los Angeles area, fares very well
with its competition in offering fast delivery. Many students at the area universities and community colleges work part-time delivering orders made via the web at PizzaRush.com. The owner, a software engineering graduate of USC, plans to purchase and install five portable, in-car systems to increase delivery speed and accuracy. The systems provide a link between the web order-placement software and the in-car GPS system for satellite-generated directions to any address in the Los Angeles area. The expected result is faster, friendlier service to customers, and more income for PizzaRush.
Each system costs $4600, has a 5-year useful life, and may be salvaged for
an estimated $300. Total operating cost for all systems is $650 for the first year, increasing by $50 per year thereafter. The MARR is 10% per year. Perform an annual worth evaluation that answers the following questions:
a. How much new annual revenue is necessary to recover only the initial
investment at an MARR of 10% per year?
b. The owner conservatively estimates increased income of $5000 per year for all five systems. Is this project financially viable at the MARR? See cash
flow diagram shown.
c. Based on the answer in part (b), determine how much new income
PizzaRush must have to economically justify the project. Operating costs
remain as estimated.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
