Compute the incremental net income of the investment for


The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 38 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 $ 25,000 Sales revenue $ 13,000 $ 13,500 $ 14,000 $ 11,000 Operating costs 2,800 2,900 3,000 2,200 Depreciation 6,250 6,250 6,250 6,250 Net working capital spending 310 360 410 310 ? a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) Year 1 Year 2 Year 3 Year 4 Net income $ $ $ $ b. Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) Year 0 Year 1 Year 2 Year 3 Year 4 Cash flow $ $ $ $ $ c. Suppose the appropriate discount rate is 10 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.) NPV $

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Financial Management: Compute the incremental net income of the investment for
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