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Colsen Communications is trying to estimate the first-year net operating cash flow (at Year 1) for...

Colsen 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 $25 million
Operating costs (excluding depreciation) 17.5 million
Depreciation 5 million
Interest expense 5 million

The company has a 40% tax rate, and its WACC is 14%.

Write out your answers completely. For example, 13 million should be entered as 13,000,000.

  1. What is the project's operating cash flow for the first year (t = 1)? Round your answer to the nearest dollar.
    $  

  3. If this project would cannibalize other projects by $2.5 million of cash flow before taxes per year, how would this change your answer to part a? Round your answer to the nearest dollar.
    The firm's OCF would now be $  

  5. Ignore Part b. If the tax rate dropped to 35%, how would that change your answer to part a? Round your answer to the nearest dollar.
    The firm's operating cash flow would -Select-increasedecreaseItem 3 by $  

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jeff jeffy answered 4 months ago
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