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Create an excel model to answer the following: Assume you are a financial manager for Pappys Pizza. Pappys already has 2 locations in Richmond and
Create an excel model to answer the following:
- Assume you are a financial manager for Pappys Pizza. Pappys already has 2 locations in Richmond and is considering adding a food truck. Pappy has asked you to build a financial model to analyze the project with the following assumptions:
- The food truck & equipment will cost Pappy $50,000. He will be able to depreciate the value of the truck & equipment on a straight-line basis over 10-years.
- Pappy expects to use it for 4 years and then sell the Food Truck for $30,000.
- Pappy does not expect the food truck to impact sales at his other stores.
- Pappy expect to sell 1,500 pies in the first year growing at a 5% annual rate.
- Pies sell for $20 on average. He does not expect to raise prices over the next 4 years.
- Variable costs tend to average 40% of sales.
- Fixed costs are expected to be $5,000 a year, growing at a 3% rate.
- Depreciation is not included in either Variable or Fixed Costs and needs to be calculated separately.
- Net working capital to support the truck is expected to be 5% of sales, and will be all liquidated at the end of the 4th year.
- Pappy pays 20% in corporate income tax. Customers are charged any sales taxes and are not needed in the calculations.
- Pappy estimates the cost of capital for this project should be 12%.
-> Build a projected cash flow model on excel.
-> Using these assumptions calculate the projects NPV, IRR, MIRR, PI, Payback, and Discounted Payback.
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