corporate finance tenth edition Chapter 6-2 The Best Manufacturing Company is co

Question

corporate finance tenth edition Chapter 6-2 The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 34 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 1 Year 2 Year 3 Year 4 Investment $24,000 Sales revenue $12,500 $13,000 $13,500 $10,500 Operating costs $2,700 $2,800 $2,900 $2,100 depreciation $6,000 $6,000 $6,000 Net working capital spending $300 $350 $400 $300 ? A Compute the incremental net income of the investment for each year? B Compute the incremental cash flows of the investment for each year? C Sup

Explanation / Answer

Answer:-

Tax rate = 34%

Investment = 24000

A.)

B.)

Year 1 2 3 4 Sales 12500 13000 13500 10500 less:- Operating Cost 2700 2800 2900 2100 less:- Depreciation 6000 6000 6000 6000 less:- Net working capital cost 300 350 400 300 NET INCOME 3500 3850 4200 8100

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