1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
lubasha [3.4K]
2 years ago
11

] Monica Geller, head chef at Allesandro's and is looking to update the commercial equipment in her kitchen and bar that will al

low them to serve 15 more people per day increase average menu order by $5. Allesandro’s currently serves 230 people per day with an average menu order of $16 per person. Monica also estimated spending $56,000 in added utility and maintenance cost every year. The expected salvage value of the upgrade at the end of 4 years is about 10% of the initial purchase. To expect a 15% required rate of return on investment, what would be the maximum amount that should be spent on the upgrade.
Mathematics
2 answers:
shutvik [7]2 years ago
6 0

Answer:

$ 1,449,682

Step-by-step explanation:

Current number of customers per day = 230 people per day

Current Average menu order = $ 16 per person

Current daily revenue = 230*16 = $ 3,680

Added utility and maintenance cost per year = $ 56,000

Expected salvage value of the upgrade at the end of 4 years = 10% of the initial purchase

Required rate of return on investment = 15%

Incremental customers = 15

Incremental average menu order = $ 5

New average menu order = 16+5 = $ 21

New number of customers per day = 230+15 = 245

New revenue per day = 245*21 = $ 5,145

Incremental revenue per day = 5145 - 3680 = $ 1,465

Incremental revenue per year = 1465*365 = $ 534,725 (considering 365 days per year)

After subtracting the added utility and maintenance cost, net incremental cash flow per year = 534725 - 56000

= $ 478,725

Present value factor for incremental cash flow over 4 years

= (1 - 1.15^-4)/0.15

= 2.855

Present value factor for salvage value after 4 years = 1.15^-4 = 0.5718

Present Value (PV) of net incremental cash flow over 4 years = 478725*2.855 = $ 1,366,760

Let x be the maximum amount that should be spent on the upgrade

Net Present Value = PV of net incremental cash flow over 4 years - initial purchase cost + Present Value of salvage value

= 1366760 - x + 0.1x*0.5718

= 1366760 - 0.9428x

To find the maximum amount to be spent on upgrade, NPV should be equated to 0

1366760 - 0.9428x = 0

x = 1366760/0.9428

= $ 1,449,682

Therefore, maximum amount to be spent on the upgrade = $ 1,449,682

liubo4ka [24]2 years ago
5 0

Answer:

The maximum amount that should be spent on the upgrade is $38,298,000.

Step-by-step explanation:

Let the initial purchase be <em>x</em>.

The ROI = 15% of <em>x</em> = 0.15<em>x</em>

At the end of 4 years, salvage value = 10% of <em>x</em> = 0.1<em>x</em>

<em />

Current income per day = $16 × 230 = $3680

Expected income per day = $21 × 245 = $5145

Increase in income per day = $5145 - $3680 = $1465

For 4 years (assuming a year is 365 days),

Increase in income = $1465 × 365 × 4 = $2138900

Maintenance and utility cost for 4 years = 4 × $56000 = $224000

At the end of 4 years,

ROI = $2138900 + salvage value = $2138900 + 0.1<em>x</em> - $224000

0.15<em>x</em> = $1914900 + 0.1<em>x</em>

0.05<em>x</em> = $1914900

<em>x</em> = $38298000

You might be interested in
Y = –3x + 5 y = mx + b Which values of m and b will create a system of linear equations with no solution? m = –3 and b = –3 m =
beks73 [17]

Answer:

(A) m = –3 and b = –3

Step-by-step explanation:

If m=–3 and b=–3

The system of linear equations:

y = –3x + 5

y = mx + b

Becomes

y = –3x + 5 ......(i)

y = –3x – 3   .......(ii)

Notice that 5 is added to -3x in (i) and -3 is added to -3x in (ii) and both equals y. This is impossible. Thus the system has no solution.

4 0
3 years ago
Read 2 more answers
At the airport, the car rental store charges a $25.00 initial rental fee and $30.00 an hour to use the car. What is the total co
Assoli18 [71]
30.00x3=90.00$+25.00$=115.00$ so it has to be 115.00)
5 0
3 years ago
Evaluate the expression when m= -2.8 and n=-6.3.<br> 4n - 6m
Alex73 [517]
Answer is 42, hope this helps
5 0
2 years ago
If h(x) = 2x4 - 4x2 - 2x, then h(3)=
Kruka [31]

Answer:

h(3)=-6

Step-by-step explanation:

sub 3 into all the positions which variable X is present

h(3) =( 2 \times 4) - (4 \times 2) - 2(3)

h(3) = 8 - 8 - 6

h(3) =  - 6

6 0
2 years ago
Read 2 more answers
Solve the quadratic equation 3x²+x-5=0
PIT_PIT [208]
This does not look easy to factor, so I'd suggest using the quadratic formula:
        -1 plus or minus sqrt( 1-4(3)(-5) )
x = -----------------------------------------------
                               2*3

         -1 plus or minus sqrt(61)
    = ------------------------------------
                             6

Thus, there are 2 real, unequal, irrational roots / solutions.
8 0
3 years ago
Other questions:
  • Subtract -b + 3 from -11b - 4<br><br> 10b - 7<br> -10b -7<br> 10b + 7<br> -12b - 1
    5·1 answer
  • 2. Which variable expression represents the phrase "Twice the sum of a number and<br> seven"
    9·1 answer
  • PLS ANSWER I WILL MARK U AS THE BRAINLIEST!!! Correct 36.2598 to
    10·1 answer
  • Students were surveyed about their favorite colors. 1/4 of the students preffered red, 1/8 of the students preffed blue, and 3/5
    7·1 answer
  • Donny had a 10-foot board. He used the board to make two shelves. One shelf measured 4 feet 7 inches wide and the other shelf me
    11·1 answer
  • Never mind don't need help
    15·1 answer
  • HELPPPP FASTTTTTT PLZZZ
    12·1 answer
  • Fasfasdasfsadasfsadsfasdsad
    11·1 answer
  • What is the Zero of f ?
    8·1 answer
  • Help me please this is due please help
    5·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!