The Best Manufacturing Company NPV

| July 29, 2018

Question in FinanceThe Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 31 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 4Investment $ 24,000Sales revenue (Y1) $12,500 (Y2) $13,000 (Y3) $13,500 (Y4) $10,500Operating costs (Y1) 2,700, (Y2) 2,800 (Y3) 2,900 (Y4) 2,100Depreciation (Y1) 6,000 (Y2) 6,000 (Y3) 6,000 (Y4) 6,000Net working capital spending300 350 400 300 ?Requirement 1:Compute the incremental net income of the investment for each year.Net incomeYear 1 $Year 2 $Year 3 $Year 4 $Requirement 2:Compute the incremental cash flows of the investment for each year. (Do not include the dollar signs ($). Negative amounts should be indicated by a minus sign.)Incremental cash flowYear 0 $Year 1 $Year 2 $Year 3 $Year 4 $Requirement 3:Suppose the appropriate discount rate is 12 percent. What is the NPV of the project? Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16))NPV $

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