Question

In: Finance

NPV.  Miglietti Restaurants is looking at a project with the following forecasted​ sales: ​ first-year sales...

NPV.  Miglietti Restaurants is looking at a project with the following forecasted​ sales: ​ first-year sales quantity of 31,000​, 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 $2,400,000. 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 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​%.

Solutions

Expert Solution

Operating cash flow (OCF) each year = income after tax + depreciation - investment in working capital

profit on sale of equipment at end of year 10 = sale price - book value

book value = original cost - accumulated depreciation

the book value is zero as the equipment is fully depreciated.

NPV is calculated using NPV function in Excel

NPV is -$1,037,165

NPV is -$1,037,165


Related Solutions

NPV.  Miglietti Restaurants is looking at a project with the following forecasted​ sales: ​ first-year sales...
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 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 ​$2,400,000. It will be...
NPV.  Miglietti Restaurants is looking at a project with the following forecasted​ sales: ​ first-year sales...
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 ​$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...
NPV.  Miglietti Restaurants is looking at a project with the following forecasted​ sales: ​ first-year sales...
NPV.  Miglietti Restaurants is looking at a project with the following forecasted​ sales: ​ first-year sales quantity of 32,000​, 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 $2,200,000. It will be...
NPV. Miglietti Restaurants is looking at a project with the following forecasted​ sales: ​ first-year sales...
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 $44.00 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 $2,200,000. It will be depreciated...
NPV.  Miglietti Restaurants is looking at a project with the following forecasted​ sales: ​ first-year sales...
NPV.  Miglietti Restaurants is looking at a project with the following forecasted​ sales: ​ first-year sales quantity of 30 comma 000​, with an annual growth rate of 4.00​% over the next ten years. The sales price per unit will start at ​$44.00 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...
NPV.  Miglietti Restaurants is looking at a project with the following forecasted​ sales: ​ first-year sales...
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 ​$40.00 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 comma 500 comma...
Miglietti Restaurants is looking at a project with the following forecasted​ sales: ​ first-year sales quantity...
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...
Miglietti Restaurants is looking at a project with the following forecasted? sales: ? first-year sales quantity...
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...
Miglietti Restaurants is looking at a project with the following forecasted? sales: ? first-year sales quantity...
Miglietti Restaurants is looking at a project with the following forecasted? sales: ? first-year sales quantity of 31,000?, with an annual growth rate of 2.00?% over the next ten years. The sales price per unit will start at $42 and will grow at 4.50?% 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...
Miglietti Restaurants is looking at a project with the following forecasted​ sales: ​ first-year sales quantity...
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 $44.00 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...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT