Reference no: EM131179697
Project cash flow Eisenhower Communications is trying to estimate the first-year net operating cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project:
Sales revenues $15 million
Operating costs (excluding depreciation) 10.5 million
Depreciation 3 million
Interest expense 3 million
The company has a 40% tax rate, and its WACC is 10%.
Write out your answers completely. For example, 13 million should be entered as 13,000,000.
a. What is the project's operating cash flow for the first year (t = 1)? Round your answer to the nearest cent.
b. If this project would cannibalize other projects by $1.5 million of cash flow before taxes per year, how would this change your answer to part a? Round your answer to the nearest cent. The firm's OCF would now be $
c. Ignore Part b. If the tax rate dropped to 30%, how would that change your answer to part a? Round your answer to the nearest cent. The firm's operating cash flow would by $
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