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Raphael Restaurant Project NPV for purchase of souffle maker

Raphael Restaurant is considering the purchase of a $10,000 souffle maker. the souffle maker has an economic life of 5 years and will be fully depreciated by the straight-line method. The machine will produce 2000 souffles per year, with each costing $2 to make and priced at $5. Using excel, assume that the discount rate is 17 percent and the tax rate is 34 percent. Should Raphael make the purchase?

Solution Preview

See the attached file.

Prepare a statement showing the incremental cash flows

Sales Price $5.00
Cost of making souffles $2.00
No of souffles 2,000 per year
Total ...

Solution Summary

This post show how to set up a project NPV calculation model using Excel.