12.02. 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 $20 million

Operating costs $16 million

Interest expense $1 million

The company has a 25% tax rate, and its WACC is 10%.

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.

$ ______

b. If this project would cannibalize other projects by $1.5 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 $ _______.