A refinery made $1,000,000 last from selling 250,000 barrels for $4 each. In response to refinery prices increasing 3.5% each year, the refinery created a project that will increase production by 5% each year for five years. General inflation is expected to increase 4.7% each year.
a. Calculate cash floor from refinery revenues in nominal dollars for years 1-5.
Refinery revenue (nominal)
year1:
year2:
year3:
year4:
year5:
b. Calculate cash flow from refinery in real dollars through years1-5.
Refinery revenue (real)
year1:
year2:
year3:
year4:
year5: