Question

One of the key questions decision makers must ask when considering whether to invest in a new technology is “what will the return on investment (ROI) be?” In other words, will this technology pay for itself, and when?

Consider an amusement park called FunTown. Funtown is a popular amusement park but because of long entrance lines to the park, yearly attendance has been flat (no increase or decrease) for the last 3 years. Unless something is done to alleviate the long entrance lines, attendance is not expected to increase for the next 3 years.

Funtown is considering implementing a handheld scanner system that can allow employees to walk around the front gates and accept credit card payment and print tickets on the spot. With the new scanner system, Funtown anticipates selling 2.4 million tickets in the next year (year 1), with a 4% increase (over the previous year) for the 2 years after that (years 2 and 3). Without the handheld scanner, Funtown anticipates selling 2.4 million tickets per year for the next 3 years.

The handheld scanner system is not without cost. Entrance to Funtown costs 35 dollars. For every ticket sold with the online scanner system, there is an expense of 6% of the ticket price.

It will take a while for the new system to catch on. Funtown estimates that 10% of year 1 attendance tickets will be sold using the online scanner. They also estimate that will grow to 20% and 30% in years 2 and 3 respectively.

Your assignment is to do a 3 year analysis of this proposal and determine if and when this scanner system will pay for itself.

Specifically, you are to calculate the net revenue of Funtown for each of the next 3 years, with, and without the new scanner system, and calculate the difference.

Answer 1

	Year 1	Year 2	Year 3
Funtown Net Revenue Analysis	With current System	With Scanner	Difference	With current System	With Scanner	Difference	With current System	With Scanner	Difference
No of Tickets sold (4% increase in Yr 2 & 3 for with scanner sales)	2,400,000	2,400,000		2,400,000	2,496,000		2,400,000	2,595,840
No of tickets sold usinf scanner device ( 10% in Yr1, 20% in Yr 2 & 30% in Yr 3)		240,000			499,200.0			778,752
No of Tickets sold without scanner	2,400,000	2,160,000		2,400,000	1,996,800		2,400,000	1,817,088
Total Net revenue and incremental Revenue( @ $35 for non scanner and @$35*94%=$32.90 for scanner tickets)	84,000,000	83,496,000	(504,000)	84,000,000	86,311,680	2,311,680	84,000,000	89,219,021	5,219,021