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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)

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  1. course codes don't mean much

  2. 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?

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