QUESTION $2$

Hoover Communications is trying to estimate the Year $1$ operating cash flow 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:

Sales revenues

$$9\mathrm{.}6$ million

Operating costs

$4\mathrm{.}4$ million

Interest expense

$1\mathrm{.}1$ million

Hoover has also determined that this project would cannibalize one of its other projects by $$1\mathrm{.}3$ million of cash flow $($before taxes$)$ per year. The firm has a $25$ percent tax rate, and its WACC is $12$ percent. Calculate the project$$s operating cash flow for Year $1.***$PLEASE SOLVE WITHOUT EXCEL!$***$

a$.$

$$3,900,000$

b$.$

$$1,500,000$

c$.$

$$3,075,000$

d$.$

$$2,100,000$

e$.$

$$2,925,000$