Question: 2. Operating cash flow: Eisenhower Communications is trying to estimate the first-year net operating cash flow (at year 1) for a proposed project. The financial

2. Operating cash flow: 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%. a. What is the projects operating cash flow for the first year (t=1)? b. If this project would cannibalize (negative externality) other projects by $1 million of cash flow before taxes per year, explain 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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