Question
Question: Analysis 2: Walmart Customer Kiosk For this analysis, you are asked to evaluate a system proposal. Analysis 2: Walmart Customer Kiosk For this analysis,
Question: Analysis 2: Walmart Customer Kiosk For this analysis, you are asked to evaluate a system proposal.
Analysis 2: Walmart Customer Kiosk For this analysis, you are asked to evaluate a system proposal for Walmart, which is considering the installation of customer kiosks in their Supercenters. The kiosks will allow customers to search for products, tell them if the products are in stock, and show them on a map where in the store the products are located. Use the following facts to conduct a break-even analysis of the customer kiosk technology.
Costs
There will be a one-time cost of $21,000,000 in 2020 to develop and implement the system software.
Starting in 2020 there will be an annual software maintenance fee of $20,500 per store in which kiosks are installed to cover bug fixes and upgrades.
Walmart has a total of 3,050 Supercenters with kiosk installation occurring on the following schedule: 750 stores in 2020, 810 stores in 2021, 960 stores in 2022, and the remaining 530 stores in 2023.
Each store will have 5 customer kiosks installed.
There is a one-time cost per kiosk of $30,050 which represents the kiosks purchase and installation.
There is an annual hardware maintenance fee of $6,000 to maintain each installed kiosk starting in the year the kiosk is installed.
Benefits
The tangible benefits come from reduced labor costs and increased sales revenue.
The kiosks are expected to reduce the need for employees to spend time directing customers to products. This time savings will result in reduced labor costs equivalent to employing one employee during regular store hours from 8 am-8 pm per store where kiosks are installed.
Supercenters are open 365 days per year.
The sales associate's labor rate is $10 per hour.
The kiosks are also expected to increase the likelihood that customers will find all of the items they are looking to purchase. It is estimated that each store with kiosks will sell 50 additional items per day, averaging $2.87 per item. Calculations The break-even analysis will cover a 6-year period from 2020-2025. For each year:
Calculate the system costs.
Calculate the system benefits.
Calculate the net benefits of the system.
Calculate the break-even total for the system.
For the total time period:
Calculate the net present value (NPV) of the investment using a rate of 20%.
Calculate the internal rate of return (IRR). At the bottom of your spreadsheet add the two questions below and include your answer to them:
In what year will Walmart break even on this project?
Based on their target rate of return of 20%, should Walmart go forward with this project?
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