La Falaise Rouge Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars). Calculate the unlevered net income for Year 2. Revenues Costs of goods sold and operating expenses other than depreciation Depreciation Increase in networking capital Capital expenditures Marginal corporate tax rate Year 1 108 -36.6 -24.2 5.1 32.1 43% Year 2 156 -36.6 -38.6 8.9 42.5 43%

La Falaise Rouge Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars). Calculate the unlevered net income for Year 2. Revenues Costs of goods sold and operating expenses other than depreciation Depreciation Increase in networking capital Capital expenditures Marginal corporate tax rate Year 1 108 -36.6 -24.2 5.1 32.1 43% Year 2 156 -36.6 -38.6 8.9 42.5 43%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Project 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 $22 million Operating costs (not including depreciation) $12 million Depreciation $6 million Interest expense $3 million The company faces a 25% tax rate. What is the project's operating cash flow for the first year (t = 1)? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as $1,200,000. Round your answer to the nearest dollar.
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