Looking for a good sample?

Let us find the best one for you! What is your topic?

Over 850,000 documents to help brainstorm your essay topic

Haven't found the Essay You Want?
GET YOUR CUSTOM ESSAY SAMPLE
For Only $13/page
10 views

Restaurant Purchasing a POS System Essays

Restaurant Purchasing a POS System

Question One:

Determine the payback period, present value, and net present value of this project for the three-year period, utilizing an 8% discount rate.

i)                    Payback period

a.       Undiscounted payback period

Nance’s Restaurant Year 0 Year 1 Year 2 Year 3 Hardware and software cost $20,000.00 Incremental increases in profit $8,000 $9,000 $10,000 Cumulative increases in profit $8,000 $17,000 $27,000 Payback period (undiscounted) = 2 years + ($20,000 – 17,000)/10,000 = 2.3 years (2 years, 3 ½ months).

b.      Discounted payback period

Nance’s Restaurant Year 0 Year 1 Year 2 Year 3 Hardware and software cost $20,000.00 incremental increases in profit $8,000 $9,000 $10,000 Present value interest factors at 18 % 0.9259 0.8573 0.7938 Present values $7,407.41 $7,716.05 $7,938.32 Cumulative increases in profit (present values) $7,407 $15,123 $23,062 Payback period (discounted) = 2 years + ($20,000 – 15,123)/7,938.32 = 2.61 years (2 years, 7.37 months).

ii)                  Present value

Present value = Sum of all present values of the cash flows.

Nance’s Restaurant Year 0 Year 1 Year 2 Year 3 Hardware and software cost $20,000.00 incremental increases in profit $8,000 $9,000 $10,000 Present value interest factors at 18 % 0.9259 0.8573 0.7938 Present values $7,407.41 $7,716.05 $7,938.32 Total present value $23,061.78

iii)                Net present value

Nance’s Restaurant Year 0 Year 1 Year 2 Year 3 Hardware and software cost $20,000.00 incremental increases in profit $8,000 $9,000 $10,000 Present value interest factors at 18 % 0.9259 0.8573 0.7938 Present values $7,407.41 $7,716.05 $7,938.32 Total present value $23,061.78 Net Present value = Present value - initial cost $(23,061.78 - 20,000) $3,061.78

Since the net present value is positive (i.e., NPV>0), Nance restaurant should consider installing the new POS system.

References

Pandey, I. M.  (1998). Financial Management (9th edition), Vikas Publishing, India.

Weston, J.F. & Copeland, T.E.  (1991). Managerial Finance (9th edition). Dryden Press.

Van Horne, J. (2008). Fundamentals of Financial Management. Prentice-Hall International Edition.

 

Sorry, but copying text is forbidden on this website. If you need this or any other sample register now and get a free access to all papers, carefully proofread and edited by our experts.

Sign Up Login We can't stand spam as much as you do No, thanks. I prefer suffering on my own

Jasmine from Graduate Way

Hi there, would you like to get such a paper? How about receiving a customized one? Check it out https://goo.gl/eHrtS5

×
search icon Can’t Find Your Topic Here?

There’s no topic we can’t write on!

Get Paper Now
  • 24/7 Support
  • Safe Payment
  • 100% Unique Content