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 10%. Write out your answers completely. For example, 13 million should be entered as 13,000,000. 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 $ 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 by $
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
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 |
17.5 million |
| Depreciation | 5 million |
| Interest expense | 5 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.
- 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 $
- 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 by $
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