The Fancy Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 24 percent.
The Fancy Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 24 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 $27,700 Year 1 Year 2 Year 3 Year 4 $14,800 $16,400 $ 17,800 $14,300 3,600 3,450 5,600 4,200 370 6,925 270 6,925 6,925 6,925 365 220 ? 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 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 c. Suppose the appropriate discount rate is 10 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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Lets address the questions one by one a Compute the incremental net income of the investment for each year Net Income can be calculated using the following formula Net Income Sales Revenue Operating C...See step-by-step solutions with expert insights and AI powered tools for academic success
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