NPV. Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity of 34,000, 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 $2,100,000. It will be depreciated using MACRS, LOADING... , 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 $160,000 at the end of the ten-year project and the cost of capital for this project is 8%. 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% What is the operating cash flow for this project in year 1? (Round to the nearest dollar.)
NPV. Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity of 34,000, 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 $2,100,000. It will be depreciated using MACRS, LOADING... , 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 $160,000 at the end of the ten-year project and the cost of capital for this project is 8%. 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% What is the operating cash flow for this project in year 1? (Round to the nearest dollar.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
NPV. Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity of
depreciated using MACRS,
and has a seven-year MACRS life classification. Fixed costs will be
34,000,
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
$2,100,000.
It will be LOADING...
,$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
$160,000
at the end of the ten-year project and the cost of capital for this project is
8%.
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%
|
What is the operating cash flow for this project in year 1? (Round to the nearest dollar.)
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