Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Etonic Inc. is considering an investment of $375,000 in an asset with an economic life of 5 years. The firm estimates that the nominal annual

Etonic Inc. is considering an investment of $375,000 in an asset with an economic life of 5 years. The firm estimates that the nominal annual cash revenues and expenses at the end of the first year will be $255,000 and $80,000, respectively. Both revenues and expenses will grow thereafter at the annual inflation rate of 3 percent. The company will use the straight-line method to depreciate its asset to zero over five years. The salvage value of the asset is estimated to be $55,000 in nominal terms at that time. The one-time net working capital investment of $15,000 is required immediately and will be recovered at the end of the project. The corporate tax rate is 38 percent.

What is the projects total nominal cash flow from assets for each year? (A negative answers should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)

Cash flow
Year 0 $
Year 1 $
Year 2 $
Year 3 $
Year 4 $
Year 5 $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financing California Real Estate Spanish Missions To Subprime Mortgages

Authors: Lynne P. Doti

1st Edition

184893601X, 978-1848936010

More Books

Students also viewed these Finance questions

Question

Please make it fast 3 9 1 .

Answered: 1 week ago

Question

=+ What topics are contained in the contracts?

Answered: 1 week ago

Question

=+Are they specific or general in nature?

Answered: 1 week ago