Question

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 $43.00 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 and has a? seven-year MACRS life classification. Fixed costs will be 350,000 per year. Miglietti Restaurants has a tax

rate 35?%. 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 99?%.

Answer 1

Due to some typo in question I am taking WACC as 9.9%. If WACC is something else I may not be responsible if the answer changes. And if its something else you can adjust answer accordingly.

All the details are here in this. And NPV was found to be positive for given WACC.