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 $41.00 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, 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 $140,000 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 4? (Round to the nearest dollar.) What is the operating cash flow for this project in year 5? (Round to the nearest dollar.) What is the operating cash flow for this project in year 6? (Round to the nearest dollar.)

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 8P: The Rodriguez Company is considering an average-risk investment in a mineral water spring project...

See similar textbooks

Related questions

Concept explainers

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

$41.00

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,

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

$140,000

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 4?

(Round to the nearest dollar.)

What is the operating cash flow for this project in year 5?

(Round to the nearest dollar.)

What is the operating cash flow for this project in year 6?

(Round to the nearest dollar.)

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.