The Fancy Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 21 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 Investment a. Year 0 $ 26,400 Sales revenue Operating costs Depreciation Net working capital spending 305 $ 13,500 2,950 6,600 205 $ 15,100 3,125 6,600 235 Year 3 $16,500 4,300 6,600 155 Year 4 $13,000 2,900 6,600 ? Compute the incremental net income of the investment for each year. (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Compute the incremental cash flows of the investment for each year. (A negative amount should be b. indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Suppose the appropriate discount rate is 9 percent. What is the NPV of the project? (Do not round C. intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
The Fancy Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 21 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 Investment a. Year 0 $ 26,400 Sales revenue Operating costs Depreciation Net working capital spending 305 $ 13,500 2,950 6,600 205 $ 15,100 3,125 6,600 235 Year 3 $16,500 4,300 6,600 155 Year 4 $13,000 2,900 6,600 ? Compute the incremental net income of the investment for each year. (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Compute the incremental cash flows of the investment for each year. (A negative amount should be b. indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Suppose the appropriate discount rate is 9 percent. What is the NPV of the project? (Do not round C. intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 6P
Related questions
Question
![The Fancy Manufacturing Company is considering a new investment. Financial projections for the
investment are tabulated here. The corporate tax rate is 21 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
a.
Investment
Sales revenue
Operating costs
Depreciation
Net working capital spending 305
Year 0
$ 26,400
C.
$ 13,500
2,950
6,600
205
Year 3
$15,100
3,125 4,300
6,600
6,600
235
$16,500
155
Year 4
$13,000
2,900
6,600
?
Compute the incremental net income of the investment for each year. (Do not round intermediate
calculations and round your answers to the nearest whole number, e.g., 32.)
Compute the incremental cash flows of the investment for each year. (A negative amount should be
b. indicated by a minus sign. Do not round intermediate calculations and round your answers to the
nearest whole number, e.g., 32.)
Suppose the appropriate discount rate is 9 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.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2683b69d-adb4-4777-95e5-c102c2eadf80%2F2bb25582-964d-4ea6-9374-4a2bb4bc27ec%2Frql30xa_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The Fancy Manufacturing Company is considering a new investment. Financial projections for the
investment are tabulated here. The corporate tax rate is 21 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
a.
Investment
Sales revenue
Operating costs
Depreciation
Net working capital spending 305
Year 0
$ 26,400
C.
$ 13,500
2,950
6,600
205
Year 3
$15,100
3,125 4,300
6,600
6,600
235
$16,500
155
Year 4
$13,000
2,900
6,600
?
Compute the incremental net income of the investment for each year. (Do not round intermediate
calculations and round your answers to the nearest whole number, e.g., 32.)
Compute the incremental cash flows of the investment for each year. (A negative amount should be
b. indicated by a minus sign. Do not round intermediate calculations and round your answers to the
nearest whole number, e.g., 32.)
Suppose the appropriate discount rate is 9 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.)
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