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12-2 PROJECT CASH FLOW 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 depre- ciated at the time of purchase. The financial staff has collected the following information on the project: Sales revenues Operating costs Interest expense $15 million 13.5 million 1 million The company has a 25% tax rate, and its WACC is 11%. a. What is the project's cash flow for the first year (t = 1)? b. 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? AFTER-TAX SALVAGE VALUE Karsted Air Services is now in the final year of a project. The ost $29 million, of which 100% has been depreciated. Karsted can sell the used equipment today for $8 million, and its tax rate is 25%. What is the equipment's after-tax salvage value? 12-3