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 14%.
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 $1 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 $ .
(A) Calculation of operating cash flow
(B) The cannibalization of existing sales needs to be considered in this analysis on an
after-tax basis, because the cannibalized sales represent sales revenue the firm would
realize without the new project but would lose if the new project is accepted. Thus,
the after-tax effect would be to reduce the firm’s operating cash flow by $1,000,000(1
– T) = $1,000,000(0.75) = $750000. Thus, the firm’s OCF would now be $750000
rather than $1500000.
Note - here depreciation did not considered because asset is fully depreciated at the time of purchased.
Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed...
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 1 million Interest expense The company has a 25% tax rate, and its WACC is 12%. Write out your answers completely. For example, 13 million should be entered as 13,000,000....
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...
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 $15 million Operating costs 12 million Interest expense 3 million The company has a 25% tax rate, and its WACC is 10%. Write out your answers completely. For example, 13 million should be entered as 13,000,000....
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 $15 million Operating costs 12 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....
2. Problem 12.02 (Project Cash Flow) еВook 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 $20 million 18 million Operating costs Interest expense 3 million The company has a 25% tax rate, and its WACC is 11% Write out your answers completely. For example,...
Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project: Sales revenues $5 million Operating costs (excluding depreciation) 3.5 million Depreciation 1 million Interest expense 1 million The company has a 40% tax rate, and its WACC is 14%. Write out your answers completely. For example, 13 million should be entered as 13,000,000. What is the project's cash flow for the first...
PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project: Sales revenues $25 million Operating costs (excluding depreciation) 17.5 million Depreciation 5 million Interest expense 5 million The company has a 40% 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 cash flow...
PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project: Sales revenues $25 million Operating costs (excluding depreciation) 17.5 million Depreciation 5 million Interest expense 5 milljon The company has a 40% tax rate, and its WACC is 13%. Write out your answers completely. For example, 13 million should be entered as 13,000,000. a. What is the project's cash...
Colsen 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 $5 million Operating costs (excluding depreciation) 3.5 million Depreciation 1 million Interest expense 1 million The company has a 40% tax rate, and its WACC is 11%. Write out your answers completely. For example, 13 million should be entered as 13,000,000. What is the project's operating cash flow...
PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project: Sales revenues $20 million Operating costs (excluding depreciation) 14 million Depreciation 4 million Interest expense 4 million The company has a 40% tax rate, and its WACC is 11%. Write out your answers completely. For example, 13 million should be entered as 13,000,000. a. What is the project's cash...