The Fleming Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 23 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   Year 3   Year 4     Investment $ 27,000                     Sales revenue     $ 14,000   $  14,500   $ 15,000   $ 12,000     Operating costs       3,000     3,100     3,200     2,400     Depreciation       6,750     6,750     6,750     6,750     Net working capital spending   330     380     430     330     ?     a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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The Fleming Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 23 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   Year 3   Year 4  
  Investment $ 27,000                  
  Sales revenue     $ 14,000   14,500   $ 15,000   $ 12,000  
  Operating costs       3,000     3,100     3,200     2,400  
  Depreciation       6,750     6,750     6,750     6,750  
  Net working capital spending   330     380     430     330     ?
 

 

a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.)
   
 
Expert Solution
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Net income or loss is one of the important output of income statement. It is calculated by deducting total expenses from total sales revenue in business. 

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