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||$5 million|
|Operating costs (excluding depreciation)||3.5 million|
|Interest expense||1 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.
A. What is the project's operating cash flow for the first year (t = 1)? Round your answer to the nearest cent. Answer: 1,300,000
B. If this project would cannibalize other projects by $0.5 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 increase, by $
* just need solutions for B and C i got A CORRECT!!!!
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