13-2: Analysis of an Expansion Project

Problem 13-2 Operating Cash Flow

The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service:

Projected sales	$20 million
Operating costs (not including depreciation)	11 million
Depreciation	4 million
Interest expense	3 million

The company faces a 35% tax rate. What is the project's operating cash flow for the first year (t = 1)? Write out your answer completely. For example, 2 million should be entered as 2,000,000.

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