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 $5 million
- Operating costs (excluding depreciation) 3.5 million
- Depreciation 1 million
- Interest expense 1 million
The company has a 40% tax rate, and its WACC is 13%.
a. What is the project's operating cash flow for the first year (t = 1)? Round your answer to the nearest cent.
b. If this project would cannibalize other projects by $0.5 million of cash flow before taxes per year, how would this change your answer to part a? Round your answer to the nearest cent. The firm's OCF would now be $
c. If the tax rate dropped to 35%, how would that change your answer to part a? Round your answer to the nearest cent. The firm's operating cash flow would increase by $