Question

Problem 8-2 Calculating Project NPV The Freeman Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. Thoe corporate tax rate is 38 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are pald in cash, and al cash flows occur at the end of the year. All net working capital is recovered at the end of the projoct Year 0 $ 39,000 Year 1 Year 2 Year 3 Year 4 Investment Sales revenue Operating costs Depreciation Net working capital spending $20,000 $20,500 $21,000 $18,000 4,200 4,300 4,400 3,600 9,750 9,750 9,750 9,750 450 500 550 450 a. Compute the incremental net income of the investment for each yoar. (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 negative 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 12 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

Please refer below spreadsheet for calculations and answer.

Formula reference -