LO, Inc., is considering an investment of $447,000 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 $285,800 and $89,400, respectively. Both revenues andexpenses will grow thereafter at the annual inflation rate of 5percent. 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 $67,000 in nominal terms at that time.The one-time net working capital investment of $21,000 is requiredimmediately and will be recovered at the end of the project. Thecorporate tax rate is 22 percent. What is the project’s totalnominal cash flow from assets for each year?
