Question

The Freeman Manufacturing Company is considering a new
investment. Financial projections for the investment are tabulated
below. The corporate tax rate is 40 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 | $ | 30,000 | ||||||||

Sales revenue | $ | 15,500 | $ | 16,000 | $ | 16,500 | $ | 13,500 | ||

Operating costs | 3,300 | 3,400 | 3,500 | 2,700 | ||||||

Depreciation | 7,500 | 7,500 | 7,500 | 7,500 | ||||||

Net working capital spending | 360 | 410 | 460 | 360 | ? | |||||

**a.** Compute the incremental net income of the
investment for each year. **(Do not round intermediate
calculations.)**

Year 1 | Year 2 | Year 3 | Year 4 | ||

Net income | $ | $ | $ | $ | |

**b.** Compute the incremental cash flows of the
investment for each year. **(Do not round intermediate
calculations.** **A n****egative answer
should be indicated by a minus sign.)**

Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | |

Cash flow | $ | $ | $ | $ | $ |

**c.** Suppose the appropriate discount rate is 10
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.)**

NPV $

Answer #1

The Freeman Manufacturing Company is considering a new
investment. Financial projections for the investment are tabulated
below. 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.
Investment
$
41,000
Sales revenue
$
21,000
$
21,500
$
22,000
$
19,000
Operating costs...

The Freeman Manufacturing Company is considering a new
investment. Financial projections for the investment are tabulated
below. The corporate tax rate is 35 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
$
32,000
Sales revenue...

The Freeman Manufacturing Company is considering a new
investment. Financial projections for the investment are tabulated
below. The corporate tax rate is 40 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
$
33,000
Sales revenue...

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
Year 3
Year 4
Investment
$
27,500
Sales revenue...

The Best Manufacturing Company is considering a new investment.
Financial projections for the investment are tabulated here. 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
$
26,600
Sales revenue...

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
Year 3
Year 4
Investment
$
28,000
Sales revenue...

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 Year 3 Year 4 Investment $ 28,000 Sales revenue...

The Best Manufacturing Company is considering a new investment.
Financial projections for the investment are tabulated here. The
corporate tax rate is 24 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 $ 26,700 Sales revenue...

The Best Manufacturing Company is considering a new investment.
Financial projections for the investment are tabulated here. The
corporate tax rate is 25 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
$
27,800
Sales revenue...

The Best Manufacturing Company is considering a new investment.
Financial projections for the investment are tabulated here. The
corporate tax rate is 25 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
$
28,300
Sales revenue...

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