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