PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for...

90.2K

Verified Solution

Question

Finance

PROJECT CASH FLOW
Colsen Communications is trying to estimate the first-year cashflow (at Year 1) for a proposed project. The financial staff hascollected 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 12%.
Write out your answers completely. For example, 13 millionshould be entered as 13,000,000.
What is the project's cash flow for the first year (t = 1)?Round your answer to the nearest dollar.
$

If this project would cannibalize other projects by $1 millionof cash flow before taxes per year, how would this change youranswer to part a? Round your answer to the nearest dollar.
The firm's project's cash flow would now be $ .

Ignore part b. If the tax rate dropped to 35%, how would thatchange your answer to part a? Round your answer to the nearestdollar.
The firm's project's cash flow would -Select-increasedecreaseItem3 by $ .

Answer & Explanation Solved by verified expert

3.7 Ratings (610 Votes)

See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

PROJECT CASH FLOWColsen Communications is trying to estimate the first-year cashflow (at Year 1) for a proposed project. The financial staff hascollected the following information on the project:Sales revenues$10 millionOperating costs (excluding depreciation)7 millionDepreciation2 millionInterest expense2 millionThe company has a 40% tax rate, and its WACC is 12%.Write out your answers completely. For example, 13 millionshould be entered as 13,000,000.What is the project's cash flow for the first year (t = 1)?Round your answer to the nearest dollar.$If this project would cannibalize other projects by $1 millionof cash flow before taxes per year, how would this change youranswer to part a? Round your answer to the nearest dollar.The firm's project's cash flow would now be $ .Ignore part b. If the tax rate dropped to 35%, how would thatchange your answer to part a? Round your answer to the nearestdollar.The firm's project's cash flow would -Select-increasedecreaseItem3 by $ .

Sales revenues	$10 million
Operating costs (excluding depreciation)	7 million
Depreciation	2 million
Interest expense	2 million