What is the NPV of Applebee’s investment in tableside tablets for its restaurant

Question

What is the NPV of Applebee’s investment in tableside tablets for its restaurants? 1,000 tablets purchased. 1. Each tablet has an initial purchase price of $250 2. The annual subscription fee per tablet is $50 3. Average revenue generated per day by each tablet is $1 4. Average number of days each tablet is in use each year is 360 days 5. Additional annual IT costs incurred for tablet integration into Applebee’s system is $225,000 6. The useful life of the tablets is four years. Ignore depreciation and taxes.

Explanation / Answer

Answer:

Assuming required rate of return = 10%

in$ Initial Cash ouflow 250000 (1000*$250) Inbetween flow A Revenue per annum 360000 (1000*$1*360 days) B Annual Subscription charges 50000 (1000*$50) C Additional annual IT costs incurred 225000 D= A-B-C Net benefit per year 85000

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