Response to the following problem:
At Applebee's, Presto tablets by E la Carte are being installed at every table. In total, Applebee's will be purchasing 100,000 tablets. Customers will be able to pay their food bill and order appetizers and desserts using the tablets. The tablets are not replacing wait staff; wait staff will still take the orders for entrees. Applebee's does not expect to reduce the work hours of its wait staff due to the tablet installation. By allowing customers to pay whenever they want using the tablets, it is expected that customers will be more satisfied, both with the ease and speed of payment. Diners are expected to get out the door faster with the new tablet payment method. The tablets will also function as jukeboxes at individual tables since customers can select and pay for music tableside.
In addition, customers will be able to play games on the tablets for a small fee. The music and game sales revenue will be split between Applebee's and E la Carte. In addition to the initial purchase price of the tablet hardware, Applebee's will be paying E la Carte a subscription fee for the use and upkeep of the tablets.
Each tablet has an initial purchase price of $250
The annual subscription fee per tablet is $50
The cost to run wiring to all tables for the tablet is $4,000,000
The cost of brackets to attach the tablets to the tables is $3,400,000
Initial training of staff on the use of the tablets $5,000,000
Additional annual IT costs incurred for tablet maintenance and updates is $225,000
The useful life of the tablets is four years. Ignore depreciation and taxes.