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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 22 percent. Assume
The Best Manufacturing Company is considering a new investment Financial projections for the investment are tabulated here. The corporate tax rate is 22 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 o $26,300 Year 2 Year 3 Year 4 Investment Sales revenue Operating costs Depreciation Net working capital spending $13,400 $ 15,000 $16,400 $12,900 2.900 3,100 4,200 2,800 6,575 6,575 6,575 6,575 300 200 225 150 ? a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.) Year 1 Year 2 Year 3 Year 4 Net income b. Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative amount should be indicated by a minus sign. Round your final answers to the nearest whole dollar amount.) Year 0 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 answer to 2 decimal places, e.g., 32.16.) NPV
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