Cairn Communications is trying to estimate the first-year operating cash flow (at t = 1) for a proposed project. The financial staff has collected the following information:
Projected sales ............... $10 million
Operating costs (not including depreciation) ..... $ 7 million
Depreciation ................ $ 2 million
Interest expense ................ $ 2 million
The company faces a 40% tax rate. What is the project’s operating cash flow for the first year (t = 1)?