ch Pizza Hut is considering implementing a logistic supply chain management system to support the daily food supply operations in Bahrain. The management system has an installation cost of $150,000. The annual software maintenance cost is $5,000 for the first 4 years, and $8,000 thereafter. In addition, there is expected to be a major upgrade cost of $15,000 every 15 years. The manager of Pizza Hut wants to know the Total Annual Equivalent Cost of the management system, if it will be used for the indefinite future. Assume 5% interest rate per year.

ch Pizza Hut is considering implementing a logistic supply chain management system to support the daily food supply operations in Bahrain. The management system has an installation cost of $150,000. The annual software maintenance cost is $5,000 for the first 4 years, and $8,000 thereafter. In addition, there is expected to be a major upgrade cost of $15,000 every 15 years. The manager of Pizza Hut wants to know the Total Annual Equivalent Cost of the management system, if it will be used for the indefinite future. Assume 5% interest rate per year.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...

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