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Use the information below for questions 14-15

Eisenhower Communications is trying to estimate the first-year net operating cash flow (at year 1) for a proposed project. The financial staff has collected the following information on the project:

Sales revenues $10 million

Operating costs (excluding depreciation) 7 million

Depreciation 2 million

Interest expense 2 million

The company has a 40% tax rate, and its WACC is 10%.

14. What is the projects operating cash flow for the first year (t=1)?

15. If this project above would cannibalize Eisenhowers other projects by $1 million of cash flow before taxes per year, explain how would this change your answer to question 14.

16. Master Card and other credit card issuers must by law print the Annual Percentage Rate (APR) on their monthly statements. If the APR is stated to be 18.00%, with interest paid monthly, what is the card's EFF% (effective rate)?

17. Wilson Co. is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $7,000 and $7,500 at the end of Years 1 and 2, respectively. In addition, Project X can be repeated at the end of Year 2 with no changes in its cash flows. Project Y has an expected life of 4 years with after-tax cash inflows of $5,600 at the end of each of the next 4 years. Each project has a WACC of 13%. What is the equivalent annual annuity of the most profitable project?