Cols Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project: Sales revenues $15 million Operating costs (excluding depreciation) 10.5 million Depreciation 3 million Interest expense 3 million The company has a 40% tax rate, and its WACC is 11%. What is the project’s cash flow for the first year (t = 1)? If the tax rate dropped to 30%, what is the project’s cash flow for the first year (t = 1)?
Cols Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project: Sales revenues $15 million Operating costs (excluding depreciation) 10.5 million Depreciation 3 million Interest expense 3 million The company has a 40% tax rate, and its WACC is 11%. What is the project’s cash flow for the first year (t = 1)? If the tax rate dropped to 30%, what is the project’s cash flow for the first year (t = 1)?
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA1: International Financial Reporting Standards
Section: Chapter Questions
Problem 3MCQ
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. Cols Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project:
Sales revenues $15 million
Operating costs (excluding depreciation) 10.5 million
Depreciation 3 million
Interest expense 3 million
The company has a 40% tax rate, and its WACC is 11%.
- What is the project’s cash flow for the first year (t = 1)?
- If the tax rate dropped to 30%, what is the project’s cash flow for the first year (t = 1)?
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