Question
Walmart is considering the installation of customer kiosks in their Supercenters. The kiosks will allow customers to search for products, tell them if the products
Walmart 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 $18,000,000 in 2018 to develop and implement the system software. Starting in 2019 there will be an annual software maintenance fee of $15,000 per store in which kiosks are installed to cover bug fixes and upgrades. Walmart has a total of 3,029 Supercenters with kiosk installation occurring on the following schedule: 600 stores in 2018, 850 stores in 2019, 950 stores in 2020, and the remaining 629 stores in 2021 Each store will have 6 customer kiosks installed. One kiosk will be located at each entrance with the other kiosks located at select spots within the store. There is a one-time cost per kiosk of $34,000 which represents the kiosks purchase and installation. There is an annual hardware maintenance fee of $8,000 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 8am-8pm per store where kiosks are installed. Supercenters are open 365 days per year. The sales associate labor rate is $10.00 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 60 additional items per day, averaging $3.40 per item. Calculations The break-even analysis will cover a 6 year period from 2018-2023. For each year: Calculate the system costs and benefits. Calculate the net benefits of the system and the break-even totals for the system. Break even totals are simply the accumulated net benefits. The project breaks even when the accumulated net benefits value is positive. For the total time period: Calculate the net present value (NPV) of the investment using a rate of 15%. Calculate the internal rate of return (IRR). Answer the four questions at the bottom of the spreadsheet. In what year will Walmart break even on this project? Based on their target rate of return of 15%, should Walmart go forward with this project? In what year will Walmart break even if the employee labor rate per hour is $12? What is the NPV if the annual hardware maintenance fee is reduced by $1,000? can you please provide Formulas for this in excel form? EX: =(c4+d4)
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