LO, Inc., is considering an investment of $454,000 in an asset
with an economic life of...
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LO, Inc., is considering an investment of $454,000 in an assetwith an economic life of five years. The firm estimates that thenominal annual cash revenues and expenses at the end of the firstyear will be $292,100 and $90,800, respectively. Both revenues andexpenses will grow thereafter at the annual inflation rate of 4percent. The company will use the straight-line method todepreciate its asset to zero over five years. The salvage value ofthe asset is estimated to be $74,000 in nominal terms at that time.The one-time net working capital investment of $24,500 is requiredimmediately and will be recovered at the end of the project. Thecorporate tax rate is 24 percent.
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What is the project’s total nominal cash flow from assets foreach year?
Year 0?
Year 1?
Year 2?
Year 3?
Year 4?
Year 5?
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3.8 Ratings (588 Votes)
GivenInitial Investment 454000Net working capital
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