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Operating cash flow? (growing each? year; MACRS). Miglietti Restaurants is looking at a project with the...

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Operating cash flow? (growing each? year; MACRS). MigliettiRestaurants is looking at a project with the following forecasted?sales: ? first-year sales quantity of 31,000? with an annual growthrate of 4.00?% over the next ten years. The sales price per unitwill start at $42 and will grow at 2.50?% per year. The productioncosts are expected to be 55?% of the current? year's sales price.The manufacturing equipment to aid this project will have a totalcost? (including installation) of $2,400,000. It will bedepreciated using? MACRS, and has a? seven-year MACRS lifeclassification. Fixed costs will be $320,000 per year. MigliettiRestaurants has a tax rate of 30?%.

What is the operating cash flow for this project overthese ten? years? Please show all 10

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4.0 Ratings (763 Votes)

0 1 2 3 4 4 5 6 7 8 9 10
Unit 31,000 32,240 33,530 34,871 36,266 37,716 39,225 40,794 42,426 44,123 45,888
Price $42 $43.05 $44.13 $45.23 $46.36 $47.52 $48.71 $49.92 $51.17 $52.45 $53.76
MACRS% 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46%
Investment ($2,400,000)
Sales $1,302,000 $1,387,932 $1,479,536 $1,577,185 $1,681,279 $1,792,243 $1,910,532 $2,036,627 $2,171,044 $2,314,333 $2,467,079
VC ($716,100) ($763,363) ($813,745) ($867,452) ($924,703) ($985,734) ($1,050,792) ($1,120,145) ($1,194,074) ($1,272,883) ($1,356,893)
FC ($320,000) ($320,000) ($320,000) ($320,000) ($320,000) ($320,000) ($320,000) ($320,000) ($320,000) ($320,000) ($320,000)
Depreciation ($342,960) ($587,760) ($419,760) ($299,760) ($214,320) ($214,080) ($214,320) ($107,040) $0 $0 $0
EBT ($77,060) ($283,191) ($73,969) $89,973 $222,256 $272,430 $325,419 $489,442 $656,970 $721,450 $790,185
Tax (30%) $23,118 $84,957 $22,191 ($26,992) ($66,677) ($81,729) ($97,626) ($146,833) ($197,091) ($216,435) ($237,056)
Net Income ($53,942) ($198,233) ($51,778) $62,981 $155,579 $190,701 $227,793 $342,609 $459,879 $505,015 $553,130
OCF ($2,400,000) $289,018 $389,527 $367,982 $362,741 $369,899 $404,781 $442,113 $449,649 $459,879 $505,015 $553,130

Depreciation = Investment x MACRS%

OCF = Net Income + Depreciation
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Transcribed Image Text

Operating cash flow? (growing each? year; MACRS). MigliettiRestaurants is looking at a project with the following forecasted?sales: ? first-year sales quantity of 31,000? with an annual growthrate of 4.00?% over the next ten years. The sales price per unitwill start at $42 and will grow at 2.50?% per year. The productioncosts are expected to be 55?% of the current? year's sales price.The manufacturing equipment to aid this project will have a totalcost? (including installation) of $2,400,000. It will bedepreciated using? MACRS, and has a? seven-year MACRS lifeclassification. Fixed costs will be $320,000 per year. MigliettiRestaurants has a tax rate of 30?%.What is the operating cash flow for this project overthese ten? years? Please show all 10

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