ch 10 question 7

NPV

Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity of 36,000, with an annual growth rate of 4.00% over the next ten yearsThe price per unit will start at $41.00 and will grow at 2.00% per year. The production costs are expected to be 55% of the current year's sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of $2.400,000. It will be depreciated using MACRSand has a seven-year MACRS life classification. Fixed costs will be $330,000 per year Restaurants has a tax rate of 38% What is the operating cash flow for this project over these ten years? Find the NPV of the project for Miglietti Restaurants if the manufacturing equipment be sold for $140,000 at the end of the ten-year project and the cost of capital for this project is 9%

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