Question

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 20 million Operating costs Interest expense 2 million The company has a 25% tax rate, and its WACC is 11%. Write out your answers completely. For example, 13 milllion should be entered as 13,000,000 a. What is the project's operating cash flow for the first year (t = 1)? Round your answer to the nearest dollar 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? Round your answer to the nearest dollar The firm's OCF would now be $

Answer 1

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NPV, IRR, PBP,OCF, INDEX - Microsoft Excel (Product Activation Failed) Page Layout Formulas File Home Insert Data Review View Add-Ins E AutoSum - Cut A A Wrap Text Calibri 11 General ECopy Fill Sort & Find & Filter Select Merge & Center Paste в IU* 000 Conditional Format Cell Insert Delete Format % Format Painter Clear Formatting as Table Styles Clipboard Alignment Styles Font Number Cells Editing fox см318 Formula Bar СР СТ СК CL СМ CN CQ CR CS CU CV 318 COLSEN 319 320 SALES REVENUE 25000000 321 OPERATING COSTS 20000000 322 DEPRECIATION 0 323 EBIT 5000000 1250000 25% TAX] 324 ТАX 325 OPERATING INCOME AFTER TAX 3750000 326 DEPRECIATION 0 327 a CASHFLOW 3750000 328 CANNIBALISATION WILL REDUCE EBIT BY 500000, 329 330 4500000 [5000000 - 500000] 331 ЕBIT 332 ТАX 1125000 333 OPERATING INCOME AFTER TAX 3375000 DEPRECIATION 334 0 3375000 335 b CASHFLOW 336 ARM, MSI, confidence INDEX OCF CASH FLOW STATW LOAN GM HPR AM TAX GROWTH SUST CROSS OVER FCF CURRENCY HEDGING MONEY MARKET PREF AND DIV POLICY 130% erences: EV46 WA 03:55 AENG 24-11-2019