Question

find operating cash flow for this project for all ten years.

NPV Migle Restaurants is looking at a project with the following forecasted sales: first year sales quantity of 32 000, with an annual growth rate of 40% over the next years. The sale price per unit will start $40.00 and will grow at 200% per year. The production costs are expected to be 55% of the current year's we price. The manufacturing equipment to aid this project will have a total cost including insation of 12.300,000. It will be depreciated using MACRS, and has a seven year MACRS i assication Foed costs wil be $340,000 per you Miglietti Restaurants as a tax rate of 30%. What is the operating flow for this project over these ten years? Find the NPV of the project for Miglietti Restaurants the manufacturing equipment can be sold for $130,000 at the end of the ten year project and the cost of capital for this project is 8% What is the operating cash flow for this project in year 1? 0 Data Table (Round to the nearest dollar) MACRS Fixed Annual Expense Percentages by Recovery Class Click on this on to download the data from this table Year 14 294 SVE 20.00 32.00% 19 20 1152 10-Year 10.00% 18. ON 1440 1152 1714 12740 883% 8.50% 8.90%

Answer 1

Answer 1:

Operating cash flows from Year 1 to Year 10, are given below:

1 / 2 Year Initial Investment 4% 4% 32,000.00 42,10 4% 43,794.21 2% $46.87 $2,052,475.86 ($1,128,861.72) ($340,000.00) 4% 45,545.98 2% $47.80 $2,177,266.39 ($1,197,496.52) ($340,000.00) Sales quantity growth Sales quantity Sales price growth Sales Price Sales value Production cost Fixed cost Depreciation rate Depreciation EBT Tax at 30% EAT Add back depreciation Operating cash flow $40.00 $1,280,000.00 ($704,000.00)| ($340,000.00) 14.29% ($328,670.00) ($92,670.00) $27,801.00 ($64,869.00) $328,670.00 $263,801.00 4% 33,280.00 2% $40.80 $1,357,824.00 ($746,803.20) ($340,000.00) 24.49% ($563,270.00) ($292,249.20) $87,674.76 ($204,574.44) $563,270.00 $358,695.56 4% 34,611.20 2% $41.62 $1,440,379.70 ($792,208.83) ($340,000.00) 17.49% ($402,270.00) L ($94,099.14) $28,229.74 ($65,869.39) $402,270.00 $336,400.61 4% 35,995.65 2% $42.45 $1,527,954.78 ($840,375.13) ($340,000.00) 12.49% ($287,270.00) $60,309.65 ($18,092.90) $42,216.76 $287,270.00 $329,486.76 37,435.47 2% $43.30 $1,620,854.44 ($891,469.94) ($340,000.00) 8.93% ($205,390.00) $183,994.50 ($55,198.35) $128,796.15 $205,390.00 $334,186.15 38,932.89 2% $44.16 $1,719,402.39 ($945,671.31)| ($340,000.00) 8.93% ($205,390.00)| $228,341.07 ($68,502.32) $159,838.75 $205,390.00 $365,228.75 4% 40,490.21 2% $45.05 $1,823,942.05 ($1,003,168.13) ($340,000.00) 8.93% ($205,390.00) $275,383.92 ($82,615.18) $192,768.75 $205,390.00 $398,158.75 4% 42,109.82 2% $45.95 $1,934,837.73 ($1,064,160.75) ($340,000.00) 4.45% ($102,350.00) $428,326.98 ($128,498.09) $299,828.88 $102,350.00 $402,178.88 $0.00 $583,614.14 ($175,084.24) $408,529.90 $0.00 $408,529.90 $0.00 $639,769.88 ($191,930.96) $447,838.91 $0.00 $447,838.91

Answer 2:

NPV of the project = $122,169.48

Working:

2 3 4 5 6 7 | 10 Year Initial Investment ($2,300,000.00) 4% Sales quantity growth Sales quantity Sales price growth Sales Price Sales value Production cost Fixed cost Depreciation rate Depreciation EBT Tax at 30% EAT Add back depreciation Operating cash flow 4% 4% 4% 4% 4% 4% 4% 4% 32,000.00 33,280.00 34,611.20 35,995.65 37,435.47 38,932.89 40,490.21 42,109.82 43,794.21 45,545.98 2% 2% 2% 2% 2% 2% 2% 2% 2% $40.00 $40.80 $41.62 $42.45 $43.30 $44.16 $45.05 $45.95 $46.87 $47.80 $1,280,000.00 $1,357,824.00 $1,440,379.70 $1,527,954.78 $1,620,854.44 $1,719,402.39 $1,823,942.05 $1,934,837.73 $2,052,475.86 $2,177,266.39 ($704,000.00) $746,803.20) ($792,208.83) ($840,375.13) ($891,469.94) ($945,671.31) ($1,003,168.13) ($1,064,160.75) ($1,128,861.72) ($1,197,496.52) ($340,000.00) ($340,000.00) ($340,000.00) ($340,000.00) ($340,000.00) ($340,000.00) ($340,000.00) ($340,000.00) ($340,000.00) ($340,000.00) 14.29% 24.49% 17.49% 12.49% 8.93% 8.93% 8.93% 4.45% ($328,670.00) ($563,270.00) ($402,270.00)| ($287,270.00) ($205,390.00) $205,390.00) $205,390.00) ($102,350.00 $0.00 $0.00 ($92,670.00)| ($292,249.20) ($94,099.14)| $60,309.65 $183,994.50 $228,341.07 $275,383.92 $428,326.98 $583,614.14 $639,769.88 $27,801.00 $87,674.76 $28,229.74 $18,092.90)| ($55,198.35)| ($68,502.32) ($82,615.18) ($128,498.09) ($175,084.24) ($191,930.96) ($64,869.00) ($204,574.44) ($65,869.39) $42,216.76 $128,796.15 $159,838.75 $192,768.75 $299,828.88 $408,529.90 $447,838.91 $328,670.00 $563,270.00 $402,270.00 $287,270.00 $205,390.00 $205,390.00 $205,390.00 $102,350.00 $0.00 $0.00 $263,801.00 $358,695.56 $336,400.61 $329,486.76 $334,186.15 $365,228.75 $398,158.75 $402,178.88 $408,529.90 $447,838.91 Salvage value net of tax $91,000.00 Cash flow ($2,300,000.00) PV Factor (1/(1+8%) Year) PV of cash flows $2,300,000.00) NPV $122,169.48 $263,801.00 0.925926 $244,260.19 $358,695.56 0.857339 $307,523.63 $336,400.61 0.793832 $267,045.65 $329,486.76 0.735030 $242,182.60 $334,186.15 0.680583 $227,441.48 $365,228.75 0.630170 $230,156.07 $398,158.75 0.583490 $232,321.80 $402,178.88 0.540269 $217,284.74 $408,529.90 0.500249 $204,366.66 $538,838.91 0.463193 $249,586.68