Economics: Other Economics Problems – #275


Question: Question 1: The Big Burrito is planning to purchase a touch screen order system for its drive-thru window that would allow customers to select their order as soon as they arrive. This would reduce customer wait tiMeand increase order accuracy. The touch screen and software would cost the Big Burrito $150,000 and would last five years. There would also be an annual maintenance cost of $5,000. In addition to improved customer service, the Big Burrito would gain two benefits. First, they could totally eliminate the full-time worker who used to accept and enter these orders. His annual salary plus benefits total $30,000 per year. Second, they expect drive-thru sales to increase by $15,000 a year due to improved customer perception and increased through-put. Cost of goods sold is 25 percent of the incremental sales. If the appropriate discount rate is 15 percent and you ignore taxes, should the Big Burrito go ahead with this investment?

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