Corporate finance

PizzaRush, which is located in the general Los Angeles area, fares very well with its competition in offering fast delivery. Many students at the area universities and community colleges work part-time delivering orders made via the web at PizzaRush.com. The owner, a software engineering graduate of USC, plans to purchase and install five portable, in-car systems to increase delivery speed and accuracy. The systems provide a link between the web order-placement software and the On-Star© system for satellite-generated directions to any address in the Los Angeles area. The expected result is faster, friendlier service to customers, and more income for PizzaRush. Each system costs $4600, has a 5-year useful life, and may be salvaged for an estimated $300. Total operating cost for all systems is $650 for the first year, increasing by $50 per year thereafter. The MARR is 10%. Perform an annual worth evaluation for the owner that answers the following questions. Perform the solution by hand and by computer, as requested below.

(a) How much new annual income is necessary to recover the investment at the MARR of 10% per year? Generate this value by hand and by computer.

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(b) The owner conservatively estimates increased income of $1200 per year for aJl five systems. Is this project financially viable at the MARR? Solve by hand and by computer.

(c) Based on the answer in part (b), use the computer to determine how much new income PizzaRush must have to economically justify the project. Operating costs remain as estimated.

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