Question
Etonic Inc. is considering an investment of $378,000 in an asset with an economic life of 5 years. The firm estimates that the nominal annual
Etonic Inc. is considering an investment of $378,000 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 $258,000 and $83,000, respectively. Both revenues and expenses will grow thereafter at the annual inflation rate of 2 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 $58,000 in nominal terms at that time. The one-time net working capital investment of $16,500 is required immediately and will be recovered at the end of the project. The corporate tax rate is 34 percent. |
What is the projects total nominal cash flow from assets for each year? |
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