The Best Manufacturing Company is considering a new investment.
Financial projections for the investment are tabulated...
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Finance
The Best Manufacturing Company is considering a new investment.Financial projections for the investment are tabulated here. Thecorporate tax rate is 34 percent. Assume all sales revenue isreceived in cash, all operating costs and income taxes are paid incash, and all cash flows occur at the end of the year. All networking capital is recovered at the end of the project.
Year 0
Year 1
Year 2
Year 3
Year 4
Ă‚Â Ă‚Â Investment
$
28,000
Ă‚Â Ă‚Â Sales revenue
$
14,500
$
15,000
$
15,500
$
12,500
Ă‚Â Ă‚Â Operating costs
3,100
3,200
3,300
2,500
Ă‚Â Ă‚Â Depreciation
7,000
7,000
7,000
7,000
Ă‚Â Ă‚Â Net working capital spending
340
390
440
340
?
a.
Compute the incremental net income of the investment for eachyear. (Do not round intermediatecalculations.)
Year 1
Year 2
Year 3
Year 4
Ă‚Â Ă‚Â Net income
$
$
$
$
b.
Compute the incremental cash flows of the investment for eachyear. (Do not round intermediate calculations.A negative answer should be indicated by a minussign.)
Year 0
Year 1
Year 2
Year 3
Year 4
Ă‚Â Ă‚Â Cash flow
$Ă‚Â Ă‚Â Ă‚Â
$Ă‚Â Ă‚Â Ă‚Â
$Ă‚Â Ă‚Â Ă‚Â
$Ă‚Â Ă‚Â Ă‚Â
$Ă‚Â Ă‚Â Ă‚Â
c.
Suppose the appropriate discount rate is 12 percent. What is theNPV of the project? (Do not round intermediate calculationsand round your answer to 2 decimal places, e.g.,32.16.)
Ă‚Â Ă‚Â NPV
$Ă‚Â Ă‚Â Ă‚Â
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