5.

Project 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	$24 million
Operating costs (not including depreciation)	$12 million
Depreciation	$4 million
Interest expense	$5 million

The company faces a 25% tax rate. What is the project's operating cash flow for the first year (t = 1)? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as $1,200,000. Round your answer to the nearest dollar.

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6.

Net Salvage Value

Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $10 million, of which 85% has been depreciated. The used equipment can be sold today for $4 million, and its tax rate is 25%. What is the equipment's after-tax net salvage value? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.

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