Nance’s Restaurant, a local independent restaurant, is evaluating new point-of-sale (POS) systems

and must determine if a new installation is feasible. A new POS installation would include
both software and hardware, with a total cost of $20,000.
Nance’s Restaurant is currently operating without a point-of-sale system and utilizes a chit
system with carbon copy papers that allow the waitstaff to provide a copy to the kitchen and
the customer while retaining a copy for accounting purposes. Management is aware that this is an archaic system and that a POS system will create efficiencies, but they are not sure it is
worth the cost.
Through analysis, management has determined that a POS system would allow the waitstaff
to turn tables quicker, therefore increasing the number of guests serviced and the sales volume.
Another advantage of the POS system is that it provides reports to management, allowing them
to better analyze their business. Taking all of these factors into consideration, Nance’s management
forecasts incremental increases in profit over the next three years of $8,000, $9,000, and
$10,000.
Determine the payback period, present value, and net present value of this project for the three-year
period, utilizing an 8% discount rate.

my answer

Figure out the repayment time period, existing value, as well as net existing worth of this project for the three-year time period, having an 8% discount charge.
Enhanced revenue over subsequent 3 years - $8,000.00, $9,000.00, and $10,000.00
Total cost = $20,000.00
Cost
Payback -----------------------------
Incremental Cash Flow

Project Cost = $20,000.00

Cash Flow 1 = $ 8,000.00
$12,000.00

Cash Flow 2 = $ 9,000.00
$ 3,000.00

Cash Flow 3 = $10,000.00

More than is needed - 2.3 years to pay back the initial investment.

The Present Value - $20,000.00

Net Present Value = $3061.78

-20000 8000 9000 10000 $3061.78
=A1+NPV(0.08,B1:D1)

course codes don't mean much

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

ITS a Hospitality class but this is a business manager ?

the book is DeFranco, A. L., & Lattin, T. W. (2007). Hospitality financial management. Hoboken, NJ: Wiley.

i don't understand this part "-20000 8000 9000 10000 $3061.78
=A1+NPV(0.08,B1:D1)"

how do they come to this answer?

To determine the payback period, present value, and net present value of the project, follow these steps:

1. Calculate the payback period:
- Subtract the initial cost of $20,000 from the incremental cash flows each year until the total cash inflows equal or exceed the initial cost.
- In this case, the cash flows are $8,000, $9,000, and $10,000 for the next three years.
- Subtract each cash flow from the initial cost until the remaining balance reaches zero or less.
- The payback period is the number of years it takes to reach zero or less.

2. Calculate the present value:
- The present value represents the current value of future cash flows, discounted at a specified rate (in this case, 8%).
- To calculate the present value for each cash flow, divide the cash flow by (1 + discount rate)^number of years.
- Add up the present values of all cash flows.

3. Calculate the net present value:
- The net present value represents the total present value minus the initial cost.
- Subtract the initial cost from the sum of the present values.

Using the given data, you can do the following calculations:

Payback period:
- In year 1, subtract $8,000 from $20,000, leaving a remaining balance of $12,000.
- In year 2, subtract $9,000 from $12,000, leaving a remaining balance of $3,000.
- In year 3, subtract $10,000 from $3,000.
- It takes 2.3 years to pay back the initial investment.

Present value:
- Divide each cash flow by (1 + discount rate)^number of years.
- PV1 = $8,000 / (1 + 0.08)^1 = $7,407.41
- PV2 = $9,000 / (1 + 0.08)^2 = $7,909.60
- PV3 = $10,000 / (1 + 0.08)^3 = $8,364.20
- The present value is the sum of the present values of all cash flows: $7,407.41 + $7,909.60 + $8,364.20 = $23,681.21

Net present value:
- Subtract the initial cost from the sum of the present values.
- Net present value = $23,681.21 - $20,000 = $3,681.21

Therefore, the payback period is 2.3 years, the present value is $23,681.21, and the net present value is $3,681.21.