Your friend Hagrid is thinking about opening a new restaurant, the Hungry Hagrid, and he asked you to make a financial analysis of the project. As you're putting your 5-year projections together, you estimate the following: • The cost of project will be $2,500,000 immediately. Your accountant tells you that IRS rules mandate that this must be depreciated over a 7-year period, using the following accelerated annual depreciation schedule: 28%, 20%, 17%, 12%, 10%, 8%, and 5%. 

• Annual sales estimates from Hagrid are in your spreadsheet. 

• COGS will be 25% of sales. 

• NWC investment of $150,000 immediately and will be 18% of sales in years 1 to 5 (assume NWC will be recovered at the end of the project).

• Salvage value of $750,000 at the end. 

• Tax rate of 22%.

• The appropriate discount rate is 12.5%. 

Find the NPV of the restaurant venture?

Answer rating: 100% (QA)

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