The 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 4
- Investment $ 18,100
- Sales revenue $9,100 $9,700 $9,600 $7,100
- Operating costs 1,200 1,800 1,700 1,600
- Depreciation 4,525 4,525 4,525 4,525
Net working capital spending
180 230 280 180 ?
Requirement 1:
- Compute the incremental net income of the investment for each year.
- Net income
- Year 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 flow
- Year 0 $
- Year 1 $
- Year 2 $
- Year 3 $
- Year 4 $
Requirement 3:
Suppose the appropriate discount rate is 11 percent. What is the NPV of the project? Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.