1. The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. Cash flows are in $ thousands, and 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.
Year 1Year 2Year 3Year 4
Net working capital (end of year)200250300200?
1.Compute the incremental net income of the investment for each year.
2.Compute the incremental cash flows of the investment for each year.
3.Suppose the appropriate discount rate is 12 percent. What is the NPV of the project?
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This question was answered on: Sep 16, 2020
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