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Perkins, Inc., is considering an investment of $373,000 in an asset with an economic life of 5 years. The firm estimates that the nominal annual
Perkins, Inc., is considering an investment of $373,000 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 $253,000 and $78,000, respectively. Both revenues and expenses will grow thereafter at the annual inflation rate of 4 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 $53,000 in nominal terms at that time. The one-time net working capital investment of $14,000 is required immediately and will be recovered at the end of the project. The tax rate is 23 percent. |
What is the projects total nominal cash flow from assets for each year? Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 |
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