Best Pizzas, which is located in Johor Bahru, 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. The owner, Zehin, a software engineering graduate, 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 In-Star system for satellite generated directions to any address in the area. The expected result is faster, friendlier service to customers and larger income. Each system costs RM 4,600, has a 5-year useful life, and may be salvaged for an estimated RM 300. Total operating cost for all systems is RM 1,000 for the first year, increasing by RM 100 per year thereafter. The MARR is 10%. Perform an annual worth evaluation for the owner that answers the following questions. (a) Calculate, how much new annual net income is necessary to recover the investment at the MARR of 10% per year? (5 Marks) (b) Zehin estimates increased net income of RM 6,000 per year for all five systems. Sketch cash flow diagram and predict, is this project financially viable at the MARR using annual worth analysis? (8 Marks) (c) Based on the answer in part (b), determine how much new net income Best Pizzas must have to economically justify the project. Operating costs remain as estimated. (7 Marks) Best Pizzas, which is located in Johor Bahru, 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. The owner, Zehin, a software engineering graduate, 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 In-Star system for satellite generated directions to any address in the area. The expected result is faster, friendlier service to customers and larger income. Each system costs RM 4,600, has a 5-year useful life, and may be salvaged for an estimated RM 300. Total operating cost for all systems is RM 1,000 for the first year, increasing by RM 100 per year thereafter. The MARR is 10%. Perform an annual worth evaluation for the owner that answers the following questions. (a) Calculate, how much new annual net income is necessary to recover the investment at the MARR of 10% per year? (5 Marks) (b) Zehin estimates increased net income of RM 6,000 per year for all five systems. Sketch cash flow diagram and predict, is this project financially viable at the MARR using annual worth analysis? (8 Marks) (c) Based on the answer in part (b), determine how much new net income Best Pizzas must have to economically justify the project. Operating costs remain as estimated. (7 Marks)
