Calculate the net present value of the new checkout

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Reference no: EM133497227

Case: In 2023, the fashion retailer FashRet considers installing a new checkout system for some of its stores. The new system will be faster and more accurate. While the useful life of the new checkout system is 6 years, FashRet plans to use the new checkout system for 3 years and then sell it for 35,000$. Below are the relevant data for the decision.

New checkout Equipment
Acquisition cost of new equipment	$55,000
Cost to retrain checkout personnel	$2,000
Cost to retrain checkout personnel	$2,000
Cost to retag merchandise	$4,000
release OF MERCHANDISE INVENTORY	$15,000

Incremental and annual data for the new checkout equipment are;

New checkout equipment - Annual Data
Annual operating - cost savings	$15,000
Annual costs of computer -system operator	$30,000
	$4,500
The more accurate checkout system allows for improved marketing, which channels into additional sales for FASHRET. Each year, the additional merchandise sold costs 50k and yields a gross profit margin of 30%
Required Rate of Return	12%
Tax Rate	40%
CCA Class 8. FashRet has other assets left in the CCA Class 8 when the new checkout equipment is disposed.	20%

Instructions.

Calculate the Net Present Value of the new checkout equipment

Reference no: EM133497227

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