In: Finance
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 | $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 13%.
Write out your answers completely. For example, 13 million should be entered as 13,000,000.
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
dollar.
The firm's OCF would now be $
Question a:
Calculation of Operating Cahs Flow for the Year 1
Operating Cash Flow for Year 1 is $2,100,000
Question b:
Calculation of Operating Cahs Flow for the Year 1
Operating Cash flow for Year 1 now is $1,200,000
Yes, this will change my answer in Question a