Reference no: EM132577865
The Best 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.
Investment Year 0 - $27,800
Sales revenue Year 1 - $14,900; Year 2 - $16,500; Year 3 - $17,900; Year 4 - $14,400. Operating costs Year 1 - 3,650; Year 2 - 3,475; Year 3 - 5,700; Year 4 - 4,300
Depreciation Year 1 - 6,950; Year 2 - 6,950; Year 3 - 6,950; Year 4 - 6,950
Net working capital spending Year 0 - 375; Year 1 - 275; Year 2 - 375; Year 4 - 225 Year 5 - ?
a.Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.)
b.Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative amount should be indicated by a minus sign.)
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.)