I know how to calculate NPV, but this problems wants me to calculate operating costs and I can not figure out sales. I really help with this one.
Who Dat Restaurant is considering the purchase of a $39000 souffle maker. The souffle maker has an economic
life of six years and will be fully depreciated by the straight-line method.
The machine will produce 2,500 souffles per year, with each costing $2 to make and priced at $7.
assume that the discount rate is 14% and the tax rate is 34%.
Should the company make the purchase?
CHAPTER 8: PROBLEM 1
Cost of Souffle Maker $39,000 ($39,000)
Economic Life 6 years
# of Souffles produced per year 2,500
Cost to make each Souffle $2
Price of each Souffle $7
Discount Rate 14%
Tax Rate 34%
Step 1: First calculate the Operating Cash Flow #NAME?
Step 2: Place the answer you get for your Operating Cash Flow in the year 1 thru year 6 cells below
Year 1 #NAME?
Year 2 #NAME?
Year 3 #NAME?
Year 4 #NAME?
Year 5 #NAME?
Year 6 #NAME?
Step 3: Now find the NPV. Be sure to include the initial cost by using cell C58 as it is negative
NPV = #NAME? (You will accept the project if the NPV is positive)
See attached Excel sheet for more details.
The expert calculates the project NPV for Who Dat Restaurants.