Question
The Fancy Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 25 percent. Assume
The Fancy Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 25 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 | Year 2 | Year 3 | Year 4 | |
---|---|---|---|---|---|
Investment | $ 27,800 | ||||
Sales revenue | $ 14,900 | $ 16,500 | $ 17,900 | $ 14,400 | |
Operating costs | 3,650 | 3,475 | 5,700 | 4,300 | |
Depreciation | 6,950 | 6,950 | 6,950 | 6,950 | |
Net working capital spending | 375 | 275 | 375 | 225 | ? |
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.) |
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.) |
c. | Suppose the appropriate discount rate is 11 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.) |
Hi, please help me solve this. Thank you. Will upvote if correct
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