Question

P10-18 (similar to) A Question Help 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 $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 $2,500,000. It will be depreciated using MACRS, E: , and has a seven-year MACRS life classification. Fixed costs will be $330,000 per year. Miglietti Restaurants has a tax rate of 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 9%. What is the operating cash flow for this project in year 1? Data Table $(Round to the nearest dollar.) MACRS Fixed Annual Expense Percentages by Recovery Class Click on this icon to download the data from this table Year 1 2 3-Year 33.33% 44.45% 14.81% 7.41% 3 5-Year 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% 4 7-Year 14.29% 24.49% 17.49% 12.49% 8.93% 8.93% 8.93% 4.45% 5 6 10-Year 10.00% 18.00% 14.40% 11.52% 9.22% 7.37% 6.55% 6.55% 6.55% 6.55% 3.28% 7 8 9 10 11 Enter your answer in the answer box and then click Check Answer. ? Print Done 11 parts Check Answer remaining

Answer 1

G3 . fix =2500000*0.1429 — J 1 n per unit 2 3 4 5 6 А B с D E F H к M N P Sales Sale Variable Contributio Depreciat Depreciat Operating Free cash Year units price cost Fixed costs ion PBT Tax@35% PAT ion cash flows Investment flows PVIF@9% Present value 0 (2,500,000) (2,500,000) 1.000 $ -2,500,000 1 32,000 $ 43.00 $ 23.65 $ 19.35 $ 330,000 357,250 (68,050) (23,818) (44,233 357,250 313,018 313,018 0.917) $ 287,172 2 33,280 $ 43.86 $ 24.12 $ 19.74 $ 330,000 612,250 (285,403) (99,891) (185,512) 612,250 426,738 426,738 0.842 $ 359,177 3 34,611 $ 44.74 $ 24.61 $ 20.13 $ 330,000 437,250 (70,466) (24,663) (45,803) 437,250 391,447 391,447 0.772 $ 302,269 4 35,996 $ 45.63 $ 25.10$ 20.53 $ 330,000 312,250 96,898 33,914 62,984 312,250 375,234 375,234 0.708 $ 265,825 5 37,435 $ 46.54 $ 25.60 $ 20.95 $ 330,000 223,250 230,838 80,793 150,045 223,250 373,295 373,295 0.650 $ 242,616 6 38,933 $ 47.48 $ 26.11$ 21.36 $ 330,000 223,250 278,511 97,479 181,032 223,250 404,282 404,282 0.596 $ 241,060 740,490 $ 48.42 $ 26.63 $ 21.79$ 330,000 223,250 329,082 115,179 213,903 223,250 437,153 437,153 0.5471 $ 239,138 8 42,110 $ 49.39 $ 27.17 $ 22.23 $ 330,000 111,250 494,728 173,155 321,573 111,250 432,823 432,823 0.502 $ 217,219 9 43,794 $ 50.38 $ 27.71 $ 22.67 $ 330,000 662,885 232,010 430,875 430,875 430,875 0.460 $ 198,387 5 45,546 $ 51.39 $ 28.26 $ 23.13 $ 330,000 723,253 253,138 470,114 470,114 91,000 561,114 0.422 $ 237,021 =140000*(1-35%) Net present value $ 89,884 8 9 10 11 12 13 14 15 16 Operating cash flow Year 1 17 Operating cash flow Year 2 18 Operating cash flow Year 3 19 Operating cash flow Year 4 20 Operating cash flow Year 5 21 Operating cash flow Year 6 22 Operating cash flow Year 7 23 Operating cash flow Year 8 24 Operating cash flow Year 9 25 Operating cash flow Year 10 26 NPV $ $ $ $ $ $ $ 313,018 426,738 391,447 375,234 373,295 404,282 437,153 432,823 430,875 470,114 89,884 is $ $ $

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