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LO, Inc., is considering an investment of $454,000 in an asset with an economic life of...

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Finance

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.

  

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?

Answer & Explanation Solved by verified expert
3.8 Ratings (588 Votes)
GivenInitial Investment 454000Net working capital    See Answer
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