The Best Manufacturing Company is evaluating a new investment opportunity. Here are the financial projections:### Financial Projections TableThe table presents data over four years, with the following entries:- **Year 0 Investment**: $27,000- **Sales Revenue**: - Year 1: $14,000 - Year 2: $14,500 - Year 3: $15,000 - Year 4: $12,000- **Operating Costs**: - Year 1: $3,000 - Year 2: $3,100 - Year 3: $3,200 - Year 4: $2,400- **Depreciation** (consistent across years): $6,750- **Net Working Capital Spending**: - Year 0: $330 - Year 1: $380 - Year 2: $430 - Year 3: $330 - Year 4: ?The corporate tax rate is specified at 34%. All cash transactions, including revenues, costs, and taxes, occur at the end of the year. Furthermore, all net working capital is expected to be recovered by the end of the project.### Tasks**a. Computing Incremental Net Income**You must compute the incremental net income for each year using the provided data. Intermediate calculations should not be rounded.- Year 1: $280- Year 2: $3,069- Year 3: $3,333- Year 4: $1,881**b. Computing Incremental Cash Flows**Calculate the incremental cash flows each year, ensuring any negative results are presented with a minus sign.- Year 0: -$2,730**c. Calculating NPV**With a discount rate of 13%, calculate the Net Present Value (NPV) of the project. The outcome should be accurately rounded to two decimal places.

The net present value is the difference between the present value of cash inflows and the present value of cash outflows.a,b&c.Calculation of net income, cash flows and NPV of the project:Formula used:a. Year 1Year 2Year 3Year 4Net Income$2,805$3,069$3,333$1,881b.Year 0Year 1Year 2Year 3Year 4Cash Flow$-27,330$9,175$9,389$9,753$10,101c. The NPV of the project is $1,096.88

Answered: The Best Manufacturing Company is…

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

Section: Chapter Questions

Problem 1PS

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