Question

Price, Inc., is considering an investment of $372,000 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 $252,000 and $77,000, respectively. Both revenues and expenses will grow thereafter at the annual inflation rate of 5 percent. Price 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 $52,000 in nominal terms at that time. The one-time net working capital investment of $13,500 is required immediately and will be recovered at the end of the project. All corporate cash flows are subject to a 34 percent tax rate. What is the project’s 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 $ =

Answer 1