Question

Miglietti Restaurants is looking at a project with the following forecasted​ sales: ​ first-year sales quantity of 35,000​, with an annual growth rate of 4.00​% over the next ten years. The sales price per unit will start at ​$42.00 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 ​$2,500,000. It will be depreciated using​ MACRS,  and has a​ seven-year MACRS life classification. Fixed costs will be ​$360,000 per year. Miglietti Restaurants has a tax rate of 40​%. 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 9​%. What is the operating cash flow for this project in year​ 1? MACRS Fixed Annual Expense Percentages by Recovery Class     Click on this icon to download the data from this table        

Year ​3-Year ​5-Year ​7-Year ​10-Year     1 ​33.33% ​20.00% ​14.29% ​10.00%     2 ​44.45% ​32.00% ​24.49% ​18.00%     3 ​14.81% ​19.20% ​17.49% ​14.40%     4 ​ 7.41% ​11.52% ​12.49% ​11.52%     5 ​11.52% ​8.93% ​9.22%     6 ​ 5.76% ​8.93% ​7.37%     7 ​8.93% ​6.55%     8 ​4.45% ​6.55%     9 ​6.55%   10 ​6.55%   11 ​3.28%

Answer 1