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The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 40 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Year 1 Year 2 Year 3 Year 4 Year o $37,000 Investment Sales revenue Operating costs Depreciation Net working capital spending $ 19,000 $ 19,500 $ 20,000 $ 17,000 4,000 4,100 4,200 3,400 9,250 9.250 9,250 9.250 480 530 430 ? 430 a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) Year 2 Year 1 $ Year 3 $ Year 4 $ Net income b. Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.) Year o $ Year 1 $ Year 2 $ Year 3 $ Year 4 $ Cash flow c. Suppose the appropriate discount rate is 12 percent. What is the NPV of the project? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) NPV Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.79 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which it will be worthless. The project is estimated to generate $2,110,000 in annual sales, with costs of $805,000. The tax rate is 35 percent and the required return is 12 percent. What is the project's NPV? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16)) NPV $ 38134.79 Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.55 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $2,030,000 in annual sales, with costs of $725,000. The tax rate is 35 percent and the required return is 15 percent. The project requires an initial investment in net working capital of $250,000, and the fixed asset will have a market value of $285,000 at the end of the project. What is the project's Year O net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.) Years Year o Year 1 Year 2 Year 3 Cash Flow $ $ What is the NPV? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) NPV Your firm is contemplating the purchase of a new $540,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $52,000 at the end of that time. You will save $300,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $67,000 (this is a one-time reduction). If the tax rate is 35 percent, what is the IRR for this project? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16)) IRR % An asset used in a four-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $6,020,000 and will be sold for $1,220,000 at the end of the project. If the tax rate is 35 percent, what is the aftertax salvage value of the asset? Refer to MACRS schedule (Do not round intermediate calculations and round your answer to 2 decimal places. Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) Aftertax salvage value $ You are evaluating two different silicon wafer milling machines. The Techron I costs $258,000, has a three-year life, and has pretax operating costs of $69,000 per year. The Techron Il costs $450,000, has a five-year life, and has pretax operating costs of $42,000 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $46,000. If your tax rate is 35 percent and your discount rate is 9 percent, compute the EAC for both machines. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) Techron! Techron 11 EAC $ $ Which do you prefer? Techron O Techron 11 Massey Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $440,000 is estimated to result in $175,000 in annual pretax cost savings. The press falls in the MACRS five-year class, and it will have a salvage value at the end of the project of $75,000. The press also requires an initial investment in spare parts inventory of $17,000, along with an additional $2,200 in inventory for each succeeding year of the project. The shop's tax rate is 30 percent and its discount rate is 8 percent. Refer to Table 6.8. Calculate the NPV of this project. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) NPV $ Should Massey buy and install the machine press? O Yes