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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
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 | $25 million |
Operating costs | 20 million |
Interest expense | 3 million |
The company has a 25% tax rate, and its WACC is 13%.
Write out your answers completely. For example, 13 million should be entered as 13,000,000.
- What is the project's operating cash flow for the first year (t = 1)? Round your answer to the nearest dollar. $_____
- If this project would cannibalize other projects by $0.5 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 $____
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