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
![\left \{ {{y=2} \atop {x=2}} \right. \int\limits^a_b {x} \, dx \lim_{n \to \infty} a_n \left[\begin{array}{ccc}1&2&3\\4&5&6\\7&8&9\end{array}\right] \beta \\ \\ \\ x^{2} \sqrt{x} \sqrt[n]{x} \frac{x}{y} x_{123} x^{123} \leq \geq \pi \alpha \left[\begin{array}{ccc}1&2&3\\4&5&6\\7&8&9\end{array}\right] \left[\begin{array}{ccc}1&2&3\\4&5&6\\7&8&9\end{array}\right] x_{123} \int\limits^a_b {x} \, dx \left \{ {{y=2} \atop {x=2}}](https://tex.z-dn.net/?f=%20%5Cleft%20%5C%7B%20%7B%7By%3D2%7D%20%5Catop%20%7Bx%3D2%7D%7D%20%5Cright.%20%20%5Cint%5Climits%5Ea_b%20%7Bx%7D%20%5C%2C%20dx%20%20%5Clim_%7Bn%20%5Cto%20%5Cinfty%7D%20a_n%20%20%20%5Cleft%5B%5Cbegin%7Barray%7D%7Bccc%7D1%262%263%5C%5C4%265%266%5C%5C7%268%269%5Cend%7Barray%7D%5Cright%5D%20%20%5Cbeta%20%20%5C%5C%20%20%5C%5C%20%20%5C%5C%20%20x%5E%7B2%7D%20%20%5Csqrt%7Bx%7D%20%20%5Csqrt%5Bn%5D%7Bx%7D%20%20%5Cfrac%7Bx%7D%7By%7D%20%20x_%7B123%7D%20%20x%5E%7B123%7D%20%20%5Cleq%20%20%5Cgeq%20%20%5Cpi%20%20%5Calpha%20%20%20%5Cleft%5B%5Cbegin%7Barray%7D%7Bccc%7D1%262%263%5C%5C4%265%266%5C%5C7%268%269%5Cend%7Barray%7D%5Cright%5D%20%20%20%5Cleft%5B%5Cbegin%7Barray%7D%7Bccc%7D1%262%263%5C%5C4%265%266%5C%5C7%268%269%5Cend%7Barray%7D%5Cright%5D%20%20x_%7B123%7D%20%20%5Cint%5Climits%5Ea_b%20%7Bx%7D%20%5C%2C%20dx%20%20%5Cleft%20%5C%7B%20%7B%7By%3D2%7D%20%5Catop%20%7Bx%3D2%7D%7D)