Question

Problem 8-2 Calculating Project NPV 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 1 Year 2 Year 3 Year 4 Year O $ 37,000 Investment Sales revenue Operating costs Depreciation Net working capital spending $19,000 4,000 9,250 480 $19,500 4,100 9,250 530 $20,000 4,200 9,250 430 $17,000 3,400 9,250 ? 430 a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) 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 o 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 $ powy

Answer 1

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- 2x QX 22 NPV, IRR, PBP,OCFINDEX - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Σ AutoSum : A Calibri 11AA = = = Dr Wrap Text General Ea Copy Fill Paste BI U D Format Painter V A Merge & Center $ - % Conditional Format 8. Cell Insert Delete Format Sort & Find & Formatting as Table Styles 2 Clear Filter Select Clipboard Font Alignment Number Styles Cells Editing QT24 2 QK QL QM QN QO QP QQ QR Qs QT QU QV QW 19 20 FREEMAN MANUFACTURING 21 YEAR 1 2 3 4 sales 19000 19500 20000 17000 23 operating costs 4000 4100 4200 3400 24 depreciation 9250 9250 9250 9250 25 EARNINGS BEFORE TAX 5750 6150 6550 4350 26 TAX 2300 2460 2620 1740 NET INCOME 3450 3690 3930 2610 28 depreciation 9250 9250 9250 9250 29 OPERATING CASH FLOW 12700 12940 13180 11860 30 INITIAL INVESTMENT -37000 31 CHANGES IN WORKING CAPITAL -430 -50 50 100 430 32 [430-480] [480-530] [530-430] [430-0] 33 CASH FLOW -37430 12650 12890 13280 12290 34 PV FACTOR AT 10% 1 0.90909 0.82645 0.75131 0.68301 PV OF CF -37430 11500 10652.9 9977.46 8394.24 3094.59 NPV 36 37 O CF CASH FLOW STATW FCFARM, MSI,confidenceINDEX CURRENCY LOAN CROSS OVER HEDGING MONEY MARKET GM HPR AM TAX GROWTH SUST PREF AND DIV POLICY I Rea ferences: EV49 BOI 130% 2. B 9 . * O ENG 27 35 H I 0 + 28-11-2019