Please include any formulas and work processes, I am tryign to understand, not j

Question

Please include any formulas and work processes, I am tryign to understand, not just find the answers

Thanks!

PROJECT CASH FLOW Colsen Communications is trying to etimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project $15 million 10.5 million 3 milliorn 3 million Sales revenues Depreciation Interest expense 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?

Explanation / Answer

1. Cash flow=(Sales-Operating costs-Depreciation)*(1-tax rate)+Depreciation=(15-10.5-3)*(1-40%)+3=3.9 million

2. =3.9-1.5*(1-40%)=3 million

3. =(15-10.5-3)*(1-30%)+3-1.5*(1-30%)=3 million

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