The new sales manager at the Coral House wishes to upgrade to a new event manage
ID: 2755259 • Letter: T
Question
The new sales manager at the Coral House wishes to upgrade to a new event management system to better manage and target corporate sales as well as weddings. Restaurant Software, Inc. (RSI) submitted a proposal costing $101,000 and Cuisine Inc’s proposal cost 100,000. Both companies have spent time with management and their accountants and have proposed the following cost benefits derived from the new system. The catering team believes the upgrade in software will yield more sales due to increased quality service and improved client contact.
RSI Systems
Cuisine
Cost
101,000
100,000
Year 1
18,500
54,500
Year 2
37,800
30,000
Year 3
39,100
28,000
Year 4
51,500
23,100
Management requires a return of 15% on all projects. Are either of these projects worth their investment? Which would you choose and why? As per the data given in the question
RSI Systems
Cuisine
Cost
101,000
100,000
Year 1
18,500
54,500
Year 2
37,800
30,000
Year 3
39,100
28,000
Year 4
51,500
23,100
Explanation / Answer
RSI system
Year
0
1
2
3
4
Cash flow
(101000)
18500
37800
39100
51500
PVF (15%)
1
0.870
.756
.658
.572
P.V.
(101000)
16095
28576.8
25727.8
29458
Net cash flows = -1142.4
Cuisine
Year
0
1
2
3
4
Cash flow
(100000)
54500
30000
28000
23100
PVF (15%)
1
0.870
.756
.658
.572
P.V.
(100000)
47415
22680
18424
13213.2
Net cash flows = 1732.2
We should select investment in cuisine as the net cash flows from investment in cuisine are positive and higher than RSI system. hence we should select "cuisine"
Year
0
1
2
3
4
Cash flow
(101000)
18500
37800
39100
51500
PVF (15%)
1
0.870
.756
.658
.572
P.V.
(101000)
16095
28576.8
25727.8
29458
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.