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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 38 percent. Assume
The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 38 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 0 Year 1 $ 36,000 Year 2 Year 3 Year 4 Investment Sales revenue Operating costs Depreciation Net working capital spending $ 18,500$ 19,000$ 19,500 $ 16,500 3,300 9,000 3,900 9,000 470 4,000 9,000 520 4,100 9,000 420 420 a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) 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 answer should be indicated by a minus sign.) Year Year 2 Year 3 Year 0 ear Cash floww 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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