(11–2)

Operating Cash Flow 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)?