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Liberty Airways is considering an investment of $870,000 in ticket purchasing kiosks at selected airports. The kiosks (hardware and software) have an expected life
Liberty Airways is considering an investment of $870,000 in ticket purchasing kiosks at selected airports. The kiosks (hardware and software) have an expected life of four years. Extra ticket sales are expected to be 64,000 per year at a discount price of $45 per ticket. Fixed costs, excluding depreciation of the equipment, are $440,000 per year, and variable costs are $27 per ticket The kiosks will be depreciated over four years, using the SL method with a zero salvage value. The onetime commitment of working capital is expected to be 1/12 of annual sales dollars. The after-tax MARR is 18% per year, and the company pays income tax at the rate of 29%. What's the after-tax PW of this proposed investment? Should the investment be made? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 18% per year. The after-tax PW of this proposed investment is $ 543 thousand. (Round to the nearest whole number.) The investment should be made.
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