1. [Submit solution for grading] To improve efficiency, a national specialty supermarket chain plans to purchase a new web-based computer hardware and software system to keep track of inventory and schedule delivery of food products for all of its 762 stores. The cost of the system will be paid through a fee charged to each store. The design life of the system is 6 years. The computer system operation and maintenance costs are estimated to be $150,000 per year. At the end of 6 years, the computer system has a salvage value of $275,000. The company will use a 3.2% annual interest rate for analysis of this project. The money required to purchase the computer system ( $3.6 million) will be raised by taking out a loan. The bank will charge an annual interest rate of 4.8% (compounded annually). a) Determine the annual payments required to repay the loan for a 4.8% annual interest rate. Draw a cash flow diagram for the loan). b) Determine the equivalent (uniform) annual cost for the new computer system (assuming a 3.2% annual interest rate). Draw a cash flow diagram that depicts all the system costs. (Hint: The capital cost of the system is not a single lump sum; it is the series of annual payments made to the bank for the loan to buy the system). c) Determine the annual fee that the company must charge to each store to cover the costs of the system. 1. [Submit solution for grading] To improve efficiency, a national specialty supermarket chain plans to purchase a new web-based computer hardware and software system to keep track of inventory and schedule delivery of food products for all of its 762 stores. The cost of the system will be paid through a fee charged to each store. The design life of the system is 6 years. The computer system operation and maintenance costs are estimated to be $150,000 per year. At the end of 6 years, the computer system has a salvage value of $275,000. The company will use a 3.2% annual interest rate for analysis of this project. The money required to purchase the computer system ( $3.6 million) will be raised by taking out a loan. The bank will charge an annual interest rate of 4.8% (compounded annually). a) Determine the annual payments required to repay the loan for a 4.8% annual interest rate. Draw a cash flow diagram for the loan). b) Determine the equivalent (uniform) annual cost for the new computer system (assuming a 3.2% annual interest rate). Draw a cash flow diagram that depicts all the system costs. (Hint: The capital cost of the system is not a single lump sum; it is the series of annual payments made to the bank for the loan to buy the system). c) Determine the annual fee that the company must charge to each store to cover the costs of the system
