Question

Paul Restaurant is considering the purchase of a $9,200 soufflé maker. The soufflé maker has an economic life of 5 years and will be fully depreciated by the straight-line method. The machine will produce 1,600 soufflés per year, with each costing $2.40 to make and priced at $4.85. The discount rate is 10 percent and the tax rate is 21 percent. points What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) eBook NPV Print References Should the company make the purchase? No Yes

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins - 2x % Cut Σ AutoSum : A Calibri 11 AA = = = pt Wrap Text General Ea Copy Fill Z Paste B I U - D SF A Merge Merge & Center Center Format Painter $ - % % 4:0 .00 8. Conditional Format Cell Insert Delete Format Sort & Find & Formatting as Table Styles Clear Filter Select Clipboard Font Alignment Number Styles Cells Editing PF683 PA PB PC PD PE PE PG PH PL PJ P K PL PM 664 665 CALCULATION OF OCF 666 revenues 7760 [=1600*4.85] NOTE ON FORMULA 667 variable costs 3840 [=1600*2.4] PVIFA @10%, 5 YEARS 3.79078677 (1/r)*(1-(1/(1+r)^n)) 668 fixed costs 669 depreciation 1840 (9200/5] 670 income before taxes 2080 671 taxes 21% 436.80 672 net income 1643.20 673 depreciation 1840.00 674 operating cash flow 3483.20 675 676 NPV = PV OF ALL OCFS - INITIAL INVESTMENT 677 NPV = (3483.20 X PVIFA @10%, 5 YEARS) - 9200 678 NPV = (3483.20 X 3.79078677) - 9200 679 ANSWER NPV = 4004.07 680 681 ANSWER YES AS NPV IS PURCHASE 682 683 684 I RRnpvbeta RATION PBP ARR invest, EAA MI-np-ir_ REPLACEMENT S HPR GMAM EAC MACRS NPV RELEVANT BETA LEVERED REPLACEMENT BOND OPTION TO WAIT STIL O Rea ferences: DX15 BOI 120% - ODOB 9 * * OENG 03-11-2019 H