Miglietti Restaurants is looking at a project with the following sales forecast: First year sales of
Question:
Miglietti Restaurants is looking at a project with the following sales forecast:
First year sales of 33,000 , with an annual growth rate of 4.00% over the next ten years.
Selling price per unit will start at $40.00 and increase 2.00% per year.
Production costs are expected to be 55% of the current year's sales price.
The total cost (including installation) of production equipment to assist with this project will be 2,500,000.
It will be amortized using MACRS, and has a MACRS life classification of seven years.
Fixed costs will be $350,000 per year. The tax rate for Miglietti Restaurants is 38%.
What is the operating cash flow for this project over these ten years?
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 99%, find the NPV of the project for Miglietti Restaurants.
Expert Answer:
Here are the steps to solve this problem 1 Calculate annual sales based on initial sales of 330... View the full answer
