The project's total nominal cash flow from assets for each year is $430,000 in Year 0, $202,000 in Year 1, $582,000 from Year 2-5, and $277,000 in Year 5.
To calculate the project's total nominal cash flow from assets for each year, we need to consider the revenues, expenses, depreciation, salvage value, and the one-time net working capital investment.
First, let's calculate the nominal cash flow from assets for each year:
Year 1:
Cash Flow = Cash Revenues - Cash Expenses = $293,000 - $91,000 = $202,000
Years 2-5:
Cash Flow = (Cash Revenues - Cash Expenses) + Depreciation
Depreciation = Initial Cost - Salvage Value = $455,000 - $75,000 = $380,000
Cash Flow = ($293,000 - $91,000) + $380,000 = $582,000
Year 5:
Cash Flow = ($293,000 - $91,000) + Salvage Value = $293,000 - $91,000 + $75,000 = $277,000
Now, let's account for the one-time net working capital investment:
Year 0:
Cash Flow = Initial Cost + Net Working Capital = $455,000 + (-$25,000) = $430,000
Therefore, the project's total nominal cash flow from assets for each year is as follows:
Year 0: $430,000
Year 1: $202,000
Year 2-5: $582,000
Year 5: $277,000
The complete question is here:
Shado, Incorporated, is considering an investment of $455,000 in an asset with an economic life of five years. The firm estimates that the nominal annual cash revenues and expenses at the end of the first year will be $293,000 and $91,000, respectively. Both revenues and expenses will grow thereafter at the annual inflation rate of 5 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 $75,000 in nominal terms at that time. The one-time net working capital investment of $25,000 is required immediately and will be recovered at the end of the project. The corporate tax rate is 25 percent. What is the project’s total nominal cash flow from assets for each year? (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)