The Fleming Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. 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 $40,000
Sales revenue $20,500 $21,000 $21,500 $18,500
Operating costs 4,300 4,400 4,500 3,700
Depreciation 10,000 10,000 10,000 10,000
Change in NWC 460 510 560 460 ?

Change in NWC in year 4 will be sum of all the NWC needed in year 0-3.

Required:
a. Compute the incremental net income of the investment for each year.
b. Compute the incremental cash flows of the investment for each year.
c. Suppose the appropriate discount rate is 12%. What is the NPV of the project?