Question
Etonic Inc. is considering an investment of $383,000 in an asset with an economic life of 5 years. The firm estimates that the nominal annual
Etonic Inc. is considering an investment of $383,000 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 $263,000 and $88,000, respectively. Both revenues and expenses will grow thereafter at the annual inflation rate of 4 percent. Etonic 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 $63,000 in nominal terms at that time. The one-time net working capital investment of $19,000 is required immediately and will be recovered at the end of the project. All corporate cash flows are subject to a 35 percent tax rate. What is the projects total nominal cash flow from assets for each year? (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.)
Cash flow
Year 0 $?
Year 1 $?
Year 2 $?
Year 3 $?
Year 4 $?
Year 5 $?
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