Solution-Compute the incremental net income of the

Compute the incremental net income of the investment

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Reference no: EM132953305

The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 22 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.         Year3. Year 4.
Investment.    $26,000
Sales Revenue $13,400 $15,000. $16400 $12,900
Operating Cost    2,900. 3,100 4,200. 2,800
Depreciation    6,575    6,575    6,575 6,575
Net Working cap. Spending. 300    200                      225    150    ?

Problem a. Compute the incremental net income of the investment for each year?

Problem b. Compute the incremental cash flows of the investment for each year?

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

Reference no: EM132953305

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Compute the incremental net income of the investment

Reference no: EM132953305

Reference no: EM132953305

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