Question
I have the below Information and need help solving for cash flow of the following scenario: Gallatin, Inc., is considering an investment of $375,000 in
I have the below Information and need help solving for cash flow of the following scenario: Gallatin, 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. All corporate cash flows are subject to a 38 percent tax rate.
How do I solve for the project's total nominal cash flow from assets for each year?
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