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In: Finance
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 | $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.
- What is the project's operating cash flow for the first year (t = 1)? Round your answer to the nearest dollar.
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 $
Solutions
Expert Solution
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
jeff jeffy answered 2 years agoRelated Solutions
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:
You must evaluate the purchase of a proposed spectrometer for
the R&D department. The base price is $60,000, and it would
cost another $9,000 to modify the equipment for special use by the
firm. The equipment falls into the MACRS 3-year class and would be
sold after 3 years for...
PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year 1)...
PROJECT CASH FLOW
Colsen Communications is trying to estimate the first-year cash
flow (at Year 1) for a proposed project. The financial staff has
collected the following information on the project:
Sales revenues
$10 million
Operating costs (excluding depreciation)
7 million
Depreciation
2 million
Interest expense
2 million
The company has a 40% tax rate, and its WACC is 11%.
Write out your answers completely. For example, 13 million
should be entered as 13,000,000.
What is the project's cash flow...
PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year 1)...
PROJECT CASH FLOW Colsen Communications is trying to estimate
the first-year 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 13%.
Write out your answers completely. For example, 13 million should
be entered as 13,000,000. What is the project's cash flow...
PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year 1)...
PROJECT CASH FLOW
Colsen Communications is trying to estimate the first-year 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 14%.
Write out your answers completely. For example, 13 million
should be entered as 13,000,000.
What is the project's cash flow...
PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year 1)...
PROJECT CASH FLOW
Colsen Communications is trying to estimate the first-year cash
flow (at Year 1) for a proposed project. The financial staff has
collected the following information on the project:
Sales revenues
$10 million
Operating costs (excluding depreciation)
7 million
Depreciation
2 million
Interest expense
2 million
The company has a 40% tax rate, and its WACC is 12%.
Write out your answers completely. For example, 13 million
should be entered as 13,000,000.
What is the project's cash flow...
PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year 1)...
PROJECT CASH FLOW
Colsen Communications is trying to estimate the first-year cash
flow (at Year 1) for a proposed project. The financial staff has
collected the following information on the project:
Sales revenues
$5 million
Operating costs (excluding depreciation)
3.5 million
Depreciation
1 million
Interest expense
1 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.
What is the project's cash flow...
PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year 1)...
PROJECT CASH FLOW
Colsen Communications is trying to estimate the first-year 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.
What is the project's cash flow...
PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year 1)...
PROJECT CASH FLOW
Colsen Communications is trying to estimate the first-year cash
flow (at Year 1) for a proposed project. The financial staff has
collected the following information on the project:
Sales revenues
$10 million
Operating costs (excluding depreciation)
7 million
Depreciation
2 million
Interest expense
2 million
The company has a 40% tax rate, and its WACC is 12%.
Write out your answers completely. For example, 13 million
should be entered as 13,000,000.
What is the project's cash flow...
PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year 1)...
PROJECT CASH FLOW
Colsen Communications is trying to estimate the first-year 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 12%.
Write out your answers completely. For example, 13 million
should be entered as 13,000,000.
What is the project's cash flow...
Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed...
Colsen Communications is trying to estimate the first-year 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.
What is the project's cash flow for the first...
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