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 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 using​ MACRS, and has a​ seven-year MACRS life classification. Fixed costs will be $330,000 per year. Miglietti Restaurants has a tax rate of 38​%. 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​%.

1: What is the operating cash flow for this project for the first five years of the​ 10-year period??

2: for the last five years of the​ 10-year period?

3: What is the book value?

4: Calculate the gain or loss at disposal of the manufacturing equipment.

5: What is the after-tax cash flow at disposal?

6: What is the net present value?

MACRS Fixed Annual Expense Percentages by Recovery Class:         

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