12-2 PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash

flow (at Year 1) for a proposed project. The financial staff has collected the following information

on the project:

Sales revenues $15 million

Operating costs (excluding depreciation) 10.5 million

Depreciation 3 million

Interest expense 3 million

The company has a 40% tax rate, and its WACC is 11%.

a. What is the projects cash flow for the first year (t 5 1)?

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?

c. Ignore part b. If the tax rate dropped to 30%, how would that change your answer to

part a?

I need a detailed typed answer to understand, not in Excel or hand write.