Problem 11-2 Operating Cash Flow The financial staff of Cairn Communications has
ID: 2765926 • Letter: P
Question
Problem 11-2 Operating Cash Flow The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service: Projected sales $25 million Operating costs (not including depreciation) 8 million Depreciation 6 million Interest expense 5 million The company faces a 30% tax rate. What is the project's operating cash flow for the first year (t = 1)? Write out your answer completely. For example, 2 million should be entered as 2,000,000.
Explanation / Answer
Sales 25000000
Operating costs (8000000)
Depreciation (6000000)
EBIT 11000000
Interest (5000000)
EBT 6000000
Tax@30% (1800000)
EAT 4200000
Operating cash flows for year 1 = 4200000 + 6000000 = 10200000.