The Best Manufacturing Company is considering a new investment. Financial projectionsfor the investment are tabulated here. The corporate tax rate is 34 percent. Assume allsales 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 theend of the project.InvestmentSales revenueOperating costsDepreciationNet working capital spendingNet incomeYear O$27,000Year 1$Cash flow330Year 1$14,000 $14,5003,0006,750380280a. Compute the incremental net income of the investment for each year. (Do not roundintermediate calculations.)Year 2Year 2Year O$-27330Year 33,100 3,2006,7506,7504303303069$15,000 $12,0002,4006,750?Year 1$Year 4Year 3b. Compute the incremental cash flows of the investment for each year. (Do not roundintermediate calculations. A negative answer should be indicated by a minus sign.)3333Year 4$Year 2$c. Suppose the appropriate discount rate is 13 percent. What is the NPV of the project?(Do not round intermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)NPV1881Year 3$Year 4$

The net present value is the difference between the present value of cash inflows and the present…

Answered: The Best Manufacturing Company is…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 6P

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