12-2 PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year...
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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 financial staff has collected the following infor- mation on the project: Sales revenues $15 million Operating costs (excluding depreciation) 10.5 million Depreciation 3 million Interest expense 3 million The company has a 40% 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 $1.5 million of cash flow before taxes per year, how would this change your answer to part a? c. Ignore part b. If the tax rate dropped to 30%, how would that change your answer to part a? 12-2 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 infor- mation on the project: Sales revenues $15 million Operating costs (excluding depreciation) 10.5 million Depreciation 3 million Interest expense 3 million The company has a 40% 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 $1.5 million of cash flow before taxes per year, how would this change your answer to part a? c. Ignore part b. If the tax rate dropped to 30%, how would that change your answer to part a?
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a EBIT for 1st Year 15 1050 3 150 million Cash Flow ... View the full answer
Related Book For
Fundamentals of Financial Management
ISBN: 978-1337395250
15th edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date:
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