Question
Perkins, Inc., is considering an investment of $382,000 in an asset with an economic life of 5 years. The firm estimates that the nominal annual
Perkins, Inc., is considering an investment of $382,000 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 $262,000 and $87,000, 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 $62,000 in nominal terms at that time. The one-time net working capital investment of $18,500 is required immediately and will be recovered at the end of the project. The tax rate is 22 percent.
What is the projects total nominal cash flow from assets for each year? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole dollar, e.g., 32.)
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
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started