Solution-Compute the incremental net income of the

Compute the incremental net income of the investment

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Reference no: EM133057554

The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 34 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. Net working capital initially goes up from 0 to $200 and then varies with time. All net working capital is recovered at the end of the project.

1. Compute the incremental net income of the investment for each year.

2. Compute the incremental cash flows of the investment for each year.

3. Suppose the appropriate discount rate is 12 percent. What is the NPV of the project?

Year 0 Year 1 Year 2 Year 3 Year 4
Investment $16,000
Sales $8,500 ; $9,000 ; $9,500 ; $7,000
Costs 1,900 ; 2,000 ; 2,200 ; 1,700
Depreciation 4,000 ; 4,000 ; 4,000 ; 4,000
Net working capital $200 ; $450 ; $750 ; $950 ; $0

Reference no: EM133057554

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Compute the incremental net income of the investment

Reference no: EM133057554

Reference no: EM133057554

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