Firm estimates that the nominal annual cash revenues

Assignment Help Financial Management
Reference no: EM131180601

Price, Inc., is considering an investment of $378,000 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 $258,000 and $83,000, respectively. Both revenues and expenses will grow thereafter at the annual inflation rate of 2 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 $58,000 in nominal terms at that time. The one-time net working capital investment of $16,500 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?

Reference no: EM131180601

Questions Cloud

Probability that a randomly selected vitamin : The amount of pyridoxine (in grams) in a multiple vitamin is normally distributed with mean = 110 grams and standard deviation = 25 grams. What is the probability that a randomly selected vitamin will contain between 82 and 100 grams of pyridoxine..
Portfolio composed solely of exchange traded options : Design a portfolio composed solely of exchange traded options (any options of your choice). Please chose a few different companies for the portfolio. Discuss the potential returns and risks involved in this portfolio. Value each option (of your choic..
Discuss the physical changes in boys and girls : Discuss the physical changes in boys and girls. Discuss how puberty affects emotional and social development in boys and girls.
Proportion of the boards : The true length of boards cut at a mill with a listed length of 10 feet is normally distributed with a mean of 123 inches and a standard deviation of 1 inch. What proportion of the boards will be less than 124 inches?
Firm estimates that the nominal annual cash revenues : Price, Inc., is considering an investment of $378,000 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 $258,000 and $83,000, respectively. All cor..
Identify the three most popularthree-d printers on market : Identify the three most popular 3D printers on the market today and discuss the manner in which you would use such a device today or in the future.
Standard deviations-data value from the mean : A given data value has a Z-value equal to 1.2. Assuming a normal (i.e., symmetrical) continuous probability distribution, how many standard deviations is the data value from the mean?
Interview a small business owner regarding his policies : Interview a small business owner regarding his Or her policies for evaluating credit applicants.- Summarize your findings in a report.
Average number of power outages : Based on data from the past 40 years, the average number of power outages at a nuclear power plant has a Poisson distribution with a mean of 0.9 outages per year. The probability that there will be exactly 2 power outages in a year is ___________..

Reviews

Write a Review

Financial Management Questions & Answers

  What is maximum initial cost company would be willing to pay

Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.72 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. What is the maximum initial cost the co..

  The need to hold cash simply as a financial reserve

A firm grants credit with terms of 2/10, net 40. The firm's customers have ___ days to pay in order to receive a _____ percent discount. Which one of the following is the need to hold cash simply as a financial reserve? Which one of the following wou..

  Equired rate of return on projects of this risk class

Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistic for the pro..

  Break even analysis utilizes both current-projected figures

Break even analysis utilizes both current and projected figures. in a rapidly changing economy, there are many individuals who are finding that their break even analyses were incorrect. What could be done to minimize errors in projections?

  Butterfly trade

Butterfly trade is: (a) Investing the same amount in long term bonds in a rolling period; (b) Buying short-term and long-term bonds and short intermediate-term bonds; (c) Mimicking the portfolio of a bond index; (d) Buying under-priced bonds using va..

  What is the amount of operating income

What is the amount of gross profit to be reported on ABC Companys 12/31/X1 income statement?- What is the amount of operating income (EMT) to be repotted on ABC Company...s 12/31/X1 income statement?

  Failure of financial institutions

Find an article about all of the problems that occurred due to the failure of financial institutions to obtain and retain notes and mortgages, leading to the inability of financial institutions to foreclose on property

  Changes in the exchange rate

Early in September 1983, it took 255 Japanese yen to equal $1. Nearly 28 years later, in August 2011, that exchange rate had fallen to 125 yen to $1. Has the price, in dollars, of the automobile increased or decreased during the 28-year period becaus..

  What is the mortgage constant

You borrow $75,000 for 30 years at 11% interest compounded annually. The value of the property is $100,000, PGI= $20,000, vacancy rates are 8%, and operating expenses are $81,000. What is the Mortgage constant? Please show me the work as well so I ca..

  Calculate the expected return on each stock

SML Suppose you observe the following situation: Return if State Occurs State of Probability of Economy State Stock A Stock B Bust .15 − .10 − .08 Normal .60 .09 .08 Boom .25 .32 .26 a. Calculate the expected return on each stock. (Do not round inter..

  Prepare a pro forma balance sheet

Pro forma balance sheet Peabody & Peabody has 2015 sales of $10 million. It wishes to analyze expected performance and financing needs for 2017, which is 2 years ahead. The percents of sales for items that vary directly with sales are as follows: Mar..

  Dividends are expected to grow at rate

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 22 percent for the next three years, with the growth rate falling off to a constant 7 percent thereafter. If the required return is 12 percent, and the company just paid a di..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd