Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The assets required for the project were fully depreciated at the time of purchase. The financial staff has collected the following information on the project: Sales revenues $25 million Operating costs 22.5 million Interest expense 1 million The company has a 25% tax rate, and its WACC is 11%. 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 dollar. $ 0 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 dollar. The firm's OCF would now be $ 0

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
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Colsen Communications is trying to estimate the first-year cash flow (at Year 1)
for a proposed project. The assets required for the project were fully depreciated
at the time of purchase. The financial staff has collected the following
information on the project:
Sales revenues
$25 million
Operating costs 22.5 million
Interest expense
1 million
The company has a 25% tax rate, and its WACC is 11%.
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 dollar.
$
0
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 dollar.
The firm's OCF would now be $
0
Transcribed Image Text:Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The assets required for the project were fully depreciated at the time of purchase. The financial staff has collected the following information on the project: Sales revenues $25 million Operating costs 22.5 million Interest expense 1 million The company has a 25% tax rate, and its WACC is 11%. 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 dollar. $ 0 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 dollar. The firm's OCF would now be $ 0
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