Problem 13-2 Operating Cash Flow The financial staff of Cairn Communications has

Question

Problem 13-2
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:

The company faces a 35% 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.

$  

13-2: Analysis of an Expansion Project

Problem 13-2
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 $20 million Operating costs (not including depreciation) 11 million Depreciation 4 million Interest expense 3 million

The company faces a 35% 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

CFO = (EBIT – Int)*(1 – T) + NCC – WC Inv

OCF = (20 – 11 – 4 – 3)*0.65 + 4 = 2*0.65 + 4 = 5.30

Operating cash flow = $5.30 million

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---