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The Fancy Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 22 percent.
The Fancy 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. Investment Sales revenue Operating costs Depreciation Net working capital spending Year O $ 27,500 Year 1 Year 2 Year 3 Year 4 $ 14,600 3,500 6,875 $ 16,200 $ 17,600 3,400 6,875 5,400 $ 14,100 4,000 6,875 6,875 360 260 345 210 ? a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Year 1 Year 2 Year 3 Year 4 Net income $ 2.808 b. Compute the incremental cash flows of the investment for each year. (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Year 0 Year 1 Year 2 Year 3 Year 4 Cash flow
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