Question
NPV.Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity of 33,000, with an annual growth rate of 4.00% over
NPV.Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity of
33,000,
with an annual growth rate of
4.00%
over the next ten years. The sales price per unit will start at
$45.00
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
$2,300,000.
It will be depreciated using MACRS,
LOADING...
,
and has aseven-year MACRS life classification. Fixed costs will be
$350,000
per year. Miglietti Restaurants has a tax rate of
30%.
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 can be sold for
$140,000
at the end of the ten-year project and the cost of capital for this project is 7 percent
.
MACRS Fixed Annual Expense Percentages by Recovery Class Click on this icon to download the data from this table Year 3-Year 1 2 33.33% 44.45% 14.81% 7.41% 3 5-Year 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% 4 7-Year 14.29% 24.49% 17.49% 12.49% 8.93% 8.93% 8.93% 4.45% 5 6 10-Year 10.00% 18.00% 14.40% 11.52% 9.22% 7.37% 6.55% 6.55% 6.55% 6.55% 3.28% 7 8 9 10 11Step by Step Solution
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